Israel plans to build 3,500 newhomes in the West Bank to cement its hold on Jerusalem, while the Palestinians warned that peace efforts were at risk, Israeli government sources said on Monday.

    A Hebrew newspaper Yedioth Ahronoth had reported that Israeli Prime Minister Ariel Sharon last week approved the construction of 3500 new homes in a bid to secure "Greater Jerusalem," which will be two new neighborhoods linking the settlement of Ma'aleh Adumimto East Jerusalem.

    Government sources have confirmed the report apart from the number of homes, said the Ha'aretz daily.

    The sources said the number of new homes would be in the "low thousands", said the daily, adding Sharon had also ordered the building of a road to bypass the area and link the Palestinian-ruled cities to the north and south of Jerusalem, Ramallah and Bethlehem.

    "The prime minister is thinking ahead to give the Palestinians territorial contiguity," the daily added.

    The blueprint for new homes appeared to flout the US-backed roadmap peace plan, whose final vision is disputed by Israel and the Palestinians.

    The road map requires a halt to settlement-building on land Israel captured in the 1967 Middle East War, where the Palestinians want as part of a future state.

    But US President George W. Bush said last year that Israel,which intends to quit the occupied Gaza Strip this year, could expect to keep some West Bank settlement blocs under an accord.

    The Palestinians, whose leader Mahmoud Abbas joined Sharon lastmonth in declaring a cease-fire and wants East Jerusalem for the capital of the future Palestinian state, accused the Jewish state of poor faith in peacemaking.

    Palestinian Cabinet Minister Saeb Erekat condemned the reported expansion, saying "if this project is carried out that means shutting the door for negotiations and peace."

    "This project intends to determine the future of Jerusalem by settlements and not negotiations," he added.

    Palestinian Planning Minister Ghassan al-Khatib also denounced that "by expanding settlements in the West Bank, Israel gives the impression that it intends to exchange Gaza for a 'Greater Israel'."

    "Israel is responsible for any consequences resulting from this continuous violation of the road map," he said. "I don't think the Palestinian leadership and people can tolerate this." Enditem