Prime Minister Ehud Olmert on Monday said Israel would continue to build homes in the east Jerusalem neighborhood of Har Homa, rejecting international criticism of the project. Israel plans to build hundreds of new apartments in the neighborhood. The US has said such construction is unhelpful to peace efforts, and the Palestinians have accused Israel of undermining peace talks. During a news conference in Jerusalem with German Chancellor Angela Merkel, Olmert called Har Homa an "inseparable" part of Jerusalem and said the construction would proceed. "When we build in Jerusalem, and we will in Jerusalem, everyone knows that there is no chance that the State of Israel will give up a neighborhood like ... Har Homa. It is an inseparable part of Jerusalem. However, Olmert said that Israel had stopped building in Judea and Samaria and would not expropriate land there. In response, Palestinian negotiator Saeb Erekat reiterated that Israel must halt all settlement construction, including in Jerusalem, and called for US intervention. "If they really want the year 2008 to be a year of peace, then this cannot be achieved with the continuation of settlement activities," Erekat said. The prime minister went on to say that the security cabinet had decided to act against Kassam fire that was "ruining tens of thousands of lives." He stressed that Hamas was a terror organization that fires rockets at children and their parents and targeted schools and kindergartens. Olmert said that peace talks with the Palestinians would resume later Monday. The Palestinians had suspended the negotiations two weeks ago to protest the IDF operation in the Gaza Strip. Palestinian officials confirmed the planned negotiating session later Monday. At the press conference, Merkel said that there were certain factors which hindered the Israeli-Palestinian peace negotiations. "The rocket fire at the South is an obstacle and so is construction in the settlements," she said. Conceding that the circumstances surrounding illegal West Bank outposts were more complex than they appeared, Merkel nevertheless urged both the Israelis and Palestinians to fulfill their commitments. Regarding the Iranian threat, Merkel urged the world to continue applying pressure on Teheran and said the Islamic Republic must act with more transparency. She reiterated that threats against Israel were effectively also threats against Germany. The chancellor said that it was up to Iran to prove it was not developing nuclear weapons and that it was not the job of the international community to do so. Earlier, at a joint meeting of Israeli and German cabinet ministers, Olmert pledged that the government would do all it could in order to protect Israeli citizens but stressed that simultaneously, it would make every effort to advance the peace process with the Palestinians. "Israel is committed to doing all it can in order to protect its citizens and we will continue our efforts to prevent Hamas from harming us," he said. "At the same time and unconditionally, we will do all we can in order to advance the peace process between us and the pragmatists, led by [PA President] Mahmoud Abbas," he said. The prime minister emphasized that the current round of negotiations was "not a default," and that Israel was conducting them out of a belief that there is a real chance of reaching an understanding between the two sides with the goal of reaching a peace agreement. Regarding the Iranian threat, Olmert said that "Israel is convinced Teheran is continuing to press ahead with its attempts to attain nuclear arms which can threaten the entire region." Olmert added that Israel would welcome dialogue with Syria if it leads to Damascus detaching itself from the axis of evil. He said Israel had no interest whatsoever in an escalation on the northern border. Meanwhile, during a meeting between Foreign Minister Tzipi Livni and her German counterpart Frank-Walter Steinmeier, Livni stressed that Iran was also a threat to moderate Arab nations and that they were likely to interpret the hesitation of the international community as a weakness. Livni went on to say that this perceived weakness was liable to lead to a dramatic change in the region, with moderate Arab states trying to form closer ties with Iran, Israel Radio reported.