US anger at Israeli plans to build flats

Mr Biden, on a visit to the West Bank, is holding talks with

Palestinian president Mahmoud Abbas and prime minister Salam Fayyad, partly to ease their doubts about the latest US peace efforts.

Israel's Interior Ministry announced late on Tuesday it had approved the new building, an embarrassing setback for Mr Biden after a day of warm meetings with senior Israeli officials.

In an apparent snub, Mr Biden pointedly arrived 90 minutes late to his scheduled dinner with Israeli Prime Minister Benjamin Netanyahu and he sharply criticised the Israeli step, which came just after the Palestinians had agreed to a new round of indirect peace talks under US mediation.

"The substance and timing of the announcement, particularly with the launching of proximity talks, is precisely the kind of step that undermines the trust we need right now," Mr Biden said.

Israel's refusal to halt building on disputed land has infuriated the Palestinians and undermined their faith in the US as an effective mediator.

President Barack Obama initially called for a complete settlement freeze, but did not take Israel to task when it only agreed to a 10-month moratorium on new housing in the West Bank.

Mr Netanyahu refuses to stop building in east Jerusalem, saying he will never partition the city. The Palestinians want east Jerusalem, captured by Israel in the 1967 war, as their future capital.

Earlier this week, the Palestinians reluctantly agreed to indirect negotiations with Israel, with US Middle East envoy George Mitchell to shuttle between Mr Abbas and Mr Netanyahu in coming months.

Mr Abbas has said he will not resume direct negotiations without a settlement freeze, leaving the US no choice but to arrange indirect talks.

Growing settlements take up more of the land the Palestinians want for their state and make partition increasingly difficult. Today, nearly 300,000 Israeli settlers live in the West Bank and 180,000 in east Jerusalem.