Defense Minister Moshe Ya'alon and Prime Minister Benjamin Netanyahu proposed Monday night that Israel's response to the murder of the three teenagers in the West Bank include a wave of settlement construction and the establishment of a new settlement in memory of Eyal Yifrah, Gilad Shaar and Naftali Fraenkel, a senior Israeli official told Haaretz.

An Israeli defense official confirmed the details and said that Ya'alon suggested the new settlement be established in the G'vaot outpost, frozen in 2002, which is located between Alon Shvut and Beitar Ilit. The Defense Ministry specified that the outpost is located on state lands and that the government already made a decision to turn it into a settlement.

During Monday's cabinet meeting, Ya'alon presented a plan prepared by the Civil Administration with various actions aimed at strengthening the Israeli settlement enterprise. The suggestions include promotion of planning procedures and the publication of construction tenders for thousands of new units in the settlement blocs. The plan also includes a proposal for a new settlement on state lands inside one of the blocs, to be named after the three victims.

Establishment of a new settlement conflicts with the commitment the Israeli government made to the U.S. government, under both President Bush and President Obama.

According to the senior official, Justice Minister Tzipi Livni opposed the move and threatened to vote against the cabinet decision. Livni said that if Israel presents settlement construction as a sanction or punishment in response to the murder, it will hurt the little bit of legitimacy Israel has from the international community to retain the settlements blocs in any future deal with the Palestinians.

Livni evoked the many condemnations of the murders expressed by a slew of world leaders, and argued that settlement construction would damage Israel's international backing and hurt the national consensus surrounding kidnapping.

"It is wrong to split the nation along ideological lines of construction that the entire nation is not behind," Livni said. "Such a move could also hurt our international legitimacy for a military operation against Hamas. Settlement construction at this stage would minimize the murders and transform it from a national issue to a political one."

Economy Minister Naftali Bennett expressed a certain amount of support for Livni's stance, stating that he objects to an Israeli response limited to settlement construction that does not include a comprehensive military operation against Hamas.

However, a heated erupted at the cabinet meeting, when Bennett called the proposed actions raised "weak and disgraceful" and threatened to vote against them. As a result, Netanyahu decided to postpone the vote and schedule another meeting for Tuesday night.

According to a source present at the meeting who preferred to remain nameless, IDF Chief of Staff Benny Gantz and Israel Defense Forces officers suggested a strike on several Hamas facilities in the Gaza Strip, most of which have already been abandoned due to Hamas' anticipation of an Israeli raid.

The source added that a draft of the cabinet's decision, which includes eight or nine clauses, was comprised primarily of plans for future operations. "It said that efforts to expel Hamas members to Gaza will continue, even though the attorney general said at the meeting that the issue is stuck due to legal hurdles."

According to the source, there were "proposals, like continued operations against Hamas' civilian infrastructure in the West Bank and the search for the kidnappers, but nothing of significance."

At one point in the meeting, the source said, Bennett burst out with a list of eight possible actions, some of them quite extreme. He suggested large-scale operations against Hamas in the Gaza Strip, confiscating Hamas money in banks in the West Bank, and to begin instating the death penalty on terrorists convicted of murder in military courts.

"The response we are discussing here is weak and borders on disgraceful," Bennett said. "This was a severe instance of the kidnapping of three kids and their murder in cold blood. A weak response to such a grave incident guarantees the next kidnapping."

Ya'alon criticized Bennett during the meeting and warned that his suggestions were dangerous. "If we implement what you propose, it will lead to an escalation we won't know how to control, to the point of a war in Gaza." Ya'alon said. "Do we really want a war in Gaza now?" Bennett responded: "We will ultimately be at war in Gaza. It's better that we be the ones to start it."

Livni also rejected Bennett's proposal. "We've had harsh terror attacks in the past, but you don't start a war because of it," she said. Minister Gilad Erdan agreed with Bennett that the defense establishment's proposals were inadequate, but opposed an operation in the Gaza Strip for fear of an escalation.

Erdan censured Gantz after he complimented the ministers for their "sane and moderate actions," arguing that his statement was "inappropriate." "Your job is not to give us grades," Erdan exclaimed.

Before the meeting ended, Bennett turned to Netanyahu and said that he intends to vote against the cabinet decision as it currently stands. Netanyahu, who during the meeting expressed that he wanted to hear additional proposals for actions against Hamas, said he wanted a unanimous decision, and as a result, postponed the vote.

Another cabinet meeting will be held Tuesday night, following the funerals of the three teenagers.

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