Prime Minister Binyamin Netanyahu told the cabinet Sunday that he made clear in the US last week that although Israel is committed to removing illegal West Bank outposts, it will not stop construction in Jerusalem or building to accomodate natural growth in the settlements. Netanyahu said he stressed in Washington that Jerusalem was not included in various understandings regarding settlement construction that were reached over the years between the US and Israel. "Jerusalem is the capital of Israel, under Israeli sovereignty, and we do not accept limits on construction or on our activity inside Israel," he said. On Sunday, the US State Department reissued its response to a question posed to it last week regarding Netanyahu's stance that all of Jerusalem will remain under Israeli sovereignty. "Jerusalem is a final-status issue. Israel and the Palestinians have agreed to resolve its status during negotiations. We will support their efforts to reach agreements on all final-status issues," the State Department said. The US and Israel have over the years reached numerous oral understandings regarding where and how construction could take place in the settlements. These understandings are expected to be discussed in detail in the coming weeks between the new Israeli and US governments. The two parties would try to hammer out what exactly a "settlement freeze" means, one senior Israeli official said. Netanyahu made clear in the cabinet meeting, however, that in his mind it did not mean stopping building to accommodate natural growth. "We can't accept the idea that families will not bring children into the world, or that children will have to move away from their parents," the prime minister said. At the same time, he said that as a country obligated by the rule of law, Israel was committed to removing the illegal outposts. Stressing that this was not a "gesture" to the US, Netanyahu said, "We want to deal with this issue as much as we can through dialogue [with the settlers], but there should be no doubt to our commitment [to remove the outposts]." "We are obliged to uphold the law," he said. "We won't establish new settlements, but there is no logic in not providing an answer to natural growth." The settler leadership and the government have been working on a deal regarding the unauthorized outposts for three years without any significant results. The discussion on the settlement issue came up as part of Netanyahu's briefing to his ministers about his recent visit to Washington. Regarding the two-state issue and his refusal to talk about a Palestinian state until the terms of statehood were defined, he said the US would not accept a state that had the ability to endanger Israel. Netanyahu has made clear that any future Palestinian entity must be demilitarized, and not have complete control over its airspace or water, the ability to enter into treaties with whomever it likes or to bring whatever, or whoever, it wants into its territory. Prior to the meeting, Defense Minister Ehud Barak said that nearly two dozen illegal outposts in the West Bank would be dismantled, with force if necessary. Under the road map peace plan, Israel is obligated to remove any unauthorized outposts established after March 2001, of which there are approximately 42. Prime ministers Ariel Sharon and Ehud Olmert both promised the United States that they would honor that commitment. Overall there are some 101 unauthorized outposts in Judea and Samaria that were built from 1995 to 2005. In March 2005, the cabinet voted to remove 24 of those outposts. Since then the Defense Ministry has added another two to the list slated for removal, for a total of 26. "There are 26 illegal outposts - declared as such by the Talia Sasson Commission - which the [Ariel Sharon] government promised the Americans would be evacuated," Barak told ministers. "But this isn't the issue between us and the Americans, or us and the Palestinians, rather first and foremost among ourselves." Barak also spoke in the meeting about the need to continue building to accommodate natural population growth in the settlements. He said that it was inconceivable that a family that bought a 45 square meter home when it had two children, and which now had eight, would be told that it could not expand it. On the question of two states, Barak said the Labor Party favored a two-state solution, and that previous agreements that the present government had committed itself to, such as the road map, had enshrined that principle. In an indirect attack on Kadima head Tzipi Livni, Barak said this issue only took on weight because of this year's election campaign. "Now the problem is that the Palestinians are talking about two states, but not two states for two peoples," he said. Barak criticized the previous, Olmert government for short-circuiting the road map; jumping from the first phase to the third phase, which deals with final-status issues. Foreign Minister Avigdor Lieberman, meanwhile, reiterated his opposition before the cabinet met to unilaterally dismantling outposts in the West Bank, and said that such a move should be part of the greater peace process that would require reciprocal action from the Palestinians. "One needs to understand that a return to the '67 borders in today's circumstances won't end the conflict and won't bring security and peace, but rather will transfer the conflict to within the '67 borders," he said. "This cannot be an individual initiative. There is no point in unveiling another plan; the correct outline is the road map, in stages. Even if we will have to evacuate this outpost or another, we will do so, but it must be part of a bigger picture," the foreign minister said. During the cabinet meeting, trying to illustrate how the settlement issue was widely misunderstood abroad, Lieberman said that in a recent meeting with French Foreign Minister Bernard Kouchner, he said that his home settlement of Nokdim needed additional preschools, and was asked by Kouchner why the children there couldn't just go to study in nearby Bethlehem. Dani Dayan, who heads the Council of Jewish Communities in Judea, Samaria and the Gaza Strip, said he was not satisfied with Netanyahu's words in support of settlement construction. No new tenders had been issued for construction since November, he said, adding that there was now a freeze on new permits for construction in the settlements. The words sound good, but the proof was in the pudding, Dayan said. What was needed, he said, was action on the ground, where so far, "nothing has happened." "Not one home has been approved, or one kilometer of road. Not one tree was planted." Therefore, he said, Netanyahu's words were theoretical and had no practical value. "The priority of the Likud-led government should be first to lift the freeze [on construction permits]," before talking about dismantling the unauthorized outposts, he said. "We understand that Mr. Netanyahu is under pressure from a propaganda campaign against settlements by foreign elements," said Dayan. But the prime minister should be carrying out the policies advocated by his party and its allies, rather than those of Peace Now, he added. Until the freeze on construction permits was lifted, the Settlers Council would not participate in any talks with the government on outpost removal, said Dayan. Hagit Ofran of Peace Now said that the government was looking for every way to continue building in the settlements and was using the excuse of natural growth in order to appease the settlers. In talking about removing outposts, it was trying to divert attention away from continued settlement construction, she said. Tovah Lazaroff contributed to this report.