Netanyahu set to deliver peace policy speech

By Jeffrey Heller

JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu gives a major policy speech on Sunday and will address the worst public rift with Washington in a decade over Jewish settlement building and Palestinian statehood.

Netanyahu was keeping a tight lid on details of the 8 p.m. (1700 GMT) speech, cancelling his customary public remarks at the start of the weekly cabinet meeting.

Setting confrontation lines with Netanyahu, U.S. President Barack Obama said in a speech on June 4 aimed at repairing U.S. relations with Muslims that continued construction in Jewish settlements in the occupied West Bank was intolerable.

He also reaffirmed a U.S. commitment to the creation of a Palestinian state in the West Bank and Gaza Strip alongside a secure Israel, a goal set by a 2003 peace "road map" that also calls for a halt to all settlement activity.

"The prime minister intends to articulate a clear view as to how he wants to move forward in the peace process with the Palestinians," said Netanyahu's spokesman Mark Regev.

"His vision is to move forward towards a historic reconciliation, and it is clear that all parties must play a role if this process is to succeed," Regev said, referring to Netanyahu's call for peace with Arab countries in the region.

Netanyahu has rejected a settlement freeze, saying "natural growth", which Israel describes as building within existing enclaves to accommodate growing families, will continue.

The Israeli leader, head of a right-leaning coalition government, has not publicly endorsed creating a Palestinian state, citing the continued rule of Hamas Islamists in Gaza.