UPDATE 3-Israeli panel revives East Jerusalem housing plan

Mon Jun 21, 2010 9:40pm GMT

* Netanyahu had sought to delay East Jerusalem plan

* Palestinians condemn project, U.S. voices concern

* Debate follows world welcome for easing of Gaza blockade

(Adds State Department, Netanyahu comment, paragraphs 6-7)

By Allyn Fisher-Ilan

JERUSALEM, June 21 (Reuters) - Israeli municipal authorities moved ahead on Monday with a plan to raze some 20 Palestinian homes in East Jerusalem, risking more U.S.-Israeli friction over a building project seen by Palestinians as settlement expansion.

The Jerusalem city planning board ratified a proposal that could renew diplomatic pressure on Prime Minister Benjamin Netanyahu a day after he bowed to world calls to ease a Gaza blockade following Israel's deadly raid on an aid flotilla.

Citing concern over Israel's international image, Netanyahu had persuaded Jerusalem Mayor Nir Barkat to put the King's Garden project on hold in March, at a time when Washington was struggling to revive Israeli-Palestinian peace talks.   Continued...

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