ISRAEL and the Palestinians will hold their first direct talks in almost three years on Wednesday, overshadowed by a deepening rift over settlements and following the release of 26 Palestinian prisoners.
The resumption of the fragile peace negotiations comes just hours after the release of the prisoners as a confidence-building gesture, and a day after Israeli authorities announced the approval of 942 new settler homes in annexed east Jerusalem, provoking Palestinian fury.
Jerusalem city authorities said that although it had only now granted final approval for the new homes in Gilo, an existing settlement in east Jerusalem, they had been in the works for years.
On the weekend, Israel's housing ministry announced tenders for the construction of 793 settlement housing units in annexed east Jerusalem and 394 elsewhere in the West Bank.
Senior Palestine Liberation Organisation official Yasser Abed Rabbo said the "unprecedented" announcements threatened to make the talks "fail even before they've started".
The last peace talks broke down in 2010 over the issue of settlement building.
In a bid to defuse the crisis, US Secretary of State John Kerry, whose dogged shuttle diplomacy brought about the first round of talks in Washington two weeks ago, phoned Abbas late on Tuesday, a senior source told AFP.
"The call Abbas received tonight from Kerry is part of ongoing US efforts to defuse a crisis before the talks (begin), as a result of the new settlement tenders today and in the last few days," he said, speaking on condition of anonymity.
A few hours before the expected start of the Wednesday talks, Israel freed 26 Palestinian prisoners.
A group of 15 crossed into the Gaza Strip and were mobbed by relatives as they got out of a bus next to the border.
At about the same time, another 11 prisoners arrived in the West Bank city of Ramallah to a welcome from Palestinian president Mahmud Abbas and thousands of cheering, dancing supporters.
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