Israel made the surprise move earlier today of effectively freezing settlement building in the West Bank and East Jerusalem - a key demand of the Palestinians as a precursor to any renewed peace talks between the two sides.

Prime Minister Benjamin Netanyahu instructed his new Housing Minister, Uri Ariel, not to press ahead with government tenders for as many as 3,000 new homes in occupied territory that Palestinians see as part of their future state.

Mr Netanyahu made a similar move in 2010 before the last round of peace talks with the Palestinians that ultimately proved to be fruitless.

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In the weeks before January's general election Mr Netanyahu announced plans for many new homes in settlements, which are considered illegal under international law. At the time, a number of political analysts suggested that the move was to counter the growing popularity of Naftali Bennett, the leader of the right wing Jewish Home Party. Mr Bennett is now the Economy Minister in Mr Netanyahu's government. Mr Ariel, who is also in the Jewish Home party, is himself a settler.

Last night, Saeb Erekat, the Palestinian chief negotiator, said: "Israel has a clear obligation under international law to immediately cease all settlement activity. We have not been notified of any changes to Israel's colonial plans, including ongoing construction in dozens of Israeli settlements in the occupied state of Palestine, including in and around our occupied capital, East Jerusalem."

The US president Barack Obama has been trying to broker a new peace initiative between the two sides following his visit to the region in March. He staged a press conference in Ramallah - the Palestinian administrative capital - with the Palestinian Authority President Mahmoud Abbas and made it clear that he would not press the Israelis to agree to another settlement freeze as a pre-condition to fresh talks. The Palestinians had earlier insisted on such a moratorium.