PREVIEW-Settlements seen clouding Netanyahu Europe trip
* Netanyahu to hold talks with U.S. envoy on settlements
* Britain and Germany critical of Israeli settlement policy
* Israeli settlement expansion continuing - watchdog group
By Allyn Fisher-Ilan
JERUSALEM, Aug 23 (Reuters) - Western demands to freeze settlement-building seem likely to dominate talks Israeli Prime Minister Benjamin Netanyahu will hold with the U.S. Middle East envoy and political leaders in Britain and Germany this week.
On the eve of the visit, Peace Now, an Israeli group opposed to Jewish settlements on Palestinian territory, said on Sunday that despite a government moratorium announced last week on approving new housing in the West Bank enclaves, more than 40,000 more homes could be built under plans already ratified.
Netanyahu flies on Monday to London, where he plans to meet British Prime Minister Gordon Brown on Tuesday and U.S. President Barack Obama's Middle East envoy, George Mitchell on Wednesday.
Mitchell has been trying to reach an agreement with Israel on a settlement freeze Obama has demanded in accordance with a 2003 peace "road map" that also calls on the Palestinians to rein in militants.
The issue has opened the widest rift in Israeli-U.S. relations in a decade.
Foreign Minister Avigdor Lieberman said on Sunday Israel was making a "sincere and serious effort" to obtain what he called a "package of understandings" with Washington on the settlements but a deal did not seem imminent.
The four-day trip includes a stop in Berlin, where Netanyahu will meet German Chancellor Angela Merkel on Thursday. Like Brown, she has been critical of Israel's settlement policy.
Palestinian President Mahmoud Abbas has made a resumption of peace talks with Israel, suspended since December, conditional on a settlement freeze.
Some 500,000 Jews live in the West Bank and Arab East Jerusalem, territory Israel captured in a 1967 war and also home to 2.5 million Palestinians.
Palestinians want to establish a state in the West Bank and Gaza Strip, with its capital in Jerusalem.
WIDE GAP
Israeli media reports suggested a wide gap remained between Israel and Washington, with Netanyahu keen to limit any settlement freeze to a six-month period and continue projects already under way.
The United States, the reports said, was seeking at least a two-year suspension.
Netanyahu has also sought U.S. assurances that a settlement deal would be accompanied by initial steps by Arab countries to normalise ties with Israel.
"We continue to work to try and find the common ground we seek with the Americans. We are not there, but we are getting close," an Israeli official said ahead of Netanyahu's trip.
In a new report, Peace Now said Defence Ministry figures showed existing government approval to build more than 40,000 housing units in West Bank settlements.
The group said construction of 596 housing units had begun in 2009, based on previously approved plans.
Nabil Abu Rdainah, an adviser to Palestinian President Mahmoud Abbas, said he hoped Netanyahu's talks with Mitchell would bring a settlement freeze and "lead to the launch of (peace) negotiations" for a Palestinian state alongside Israel.
Netanyahu will make his European trip amid a row with Sweden, currently president of the European Union, over a Swedish newspaper which repeated Palestinian accusations dating to the early 1990s that Israeli troops took organs from men who died in custody.
Israeli officials and commentators came out in force to air historical Jewish grievances against Europe in general and Swedes in particular.
Those ranged from the European "blood libels" of the Middle Ages -- that Jews made ritual use of Christian babies' blood -- to modern resentments about Sweden's neutrality toward Hitler. (Additional reporting by Ali Sawafta in Ramallah; Editing by Charles Dick) (For blogs and links on Israeli and Palestinian news, go to blogs.reuters.com/axismundi) (allyn.fisher.reuters.com@reuters.net;=972-2-6322202; Reuters Messaging:allyn.fisher.reuters.com@reuters.net))
Source: Reuters
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