A war of words erupted between MKs and Prime Minister Ehud Olmert's office on Monday over the exact phrasing of a cabinet decision regarding new construction in Jerusalem. In a closed session of the Knesset Foreign Affairs and Defense Subcommittee on Settlements, a senior Housing Ministry official said Olmert had taken control of new building and construction permits issued over the Green Line - including in such east Jerusalem neighborhoods as Ramot, Gilo and Pisgat Ze'ev. The move would be a direct departure from the prime minister's official policy, which Olmert recently stated as freezing all development in the West Bank, while treating Jerusalem as a separate entity and encouraging Jewish development across the city. The Prime Minister's Office issued a statement denying the report by the Housing Ministry official, and a spokesman for the ministry said the comments had been "taken out of context and exaggerated" by those hoping to topple the government. MKs on the committee, however, insisted that Olmert was trying to "cover up" his intentions to divide the capital. All meetings of the Foreign Affairs and Defense Committee and its subcommittees are closed to the public, and protocols of the meetings are kept secret for 50 years. "We categorically deny these reports regarding the cessation of construction. No such decision has been made and the information provided on this matter is unfounded," Olmert's office said in a statement. The statement further said it has been made clear to all international parties, including US President George W. Bush, that Israel has no intention of freezing building projects in east Jerusalem. On December 30, Olmert sent a letter to the Housing, Defense, and Agriculture ministries announcing that from January 1 all new construction and development in the West Bank had to be approved by the Prime Minister's Office and the Defense Ministry. "In light of Bush's visit, Olmert took personal responsibility to freeze all expansion in the West Bank," said a spokeswoman from the Prime Minister's Office. "It was very clear that the freeze was on the West Bank and not over the Green Line." While Olmert has repeatedly agreed to a freeze in the settlements and has insisted that no new tenders have been issued since the first quarter of 2007, he has recently maintained that Jerusalem is a separate issue that Israel will not negotiate over. The issue of Jerusalem has become the Achilles' heel of Olmert's coalition, a senior Housing Ministry official said. "Everyone hoping to topple the government at this moment is taking aim at the coalition through its most sensitive issue - Jerusalem," said the official. The Shas's continued participation in the coalition was contingent on the issue, a party spokesman said. If Olmert were to even hint at parts of Jerusalem being placed on the negotiating table with the Palestinians, Shas would withdraw from the government, he added. Shas chairman Eli Yishai raised the matter with Olmert in the plenum on Monday. He said Olmert and Defense Minister Ehud Barak had told him in the past that there would be no freeze in Jerusalem or its suburbs. "It is unfathomable that they wouldn't keep their word," said Yishai. "The other [Palestinian] side is building illegally in Jerusalem, so there is no reason for us to not build. If there will be negotiations with the Palestinians on Jerusalem, we will leave the coalition." Foreign Minister Tzipi Livni said Monday that the government would decide "where, when and how" construction should take place, but added that "no conclusions should be drawn" as a result of the decision regarding Israeli sovereignty in Jerusalem. Monday's Foreign Affairs and Defense Committee meeting was initiated by MK Reuven Rivlin (Likud) and Ze'ev Elkin (Kadima); both said the Housing Ministry had revealed a new policy on building. Rivlin asked Yishai for a meeting with Shas mentor Rabbi Ovadia Yosef to explain to him the ramifications of a building freeze in Jerusalem. Rivlin and MK Yisrael Katz (Likud) called on Shas to react to the news by leaving the coalition. Several members of Olmert's own Kadima Party have also threatened to rebel against the prime minister over the issue. MKs Marina Solodkin and Ze'ev Elkin have repeatedly voted against the government over Jerusalem, supporting no-confidence motions submitted by Likud. MK Otniel Schneller (Kadima), who heads the Foreign Affairs and Defense subcommittee and was present at Monday's meeting, said Olmert's opponents were engaging in a large-scale PR effort designed to misinform the public on the issue. "No specific neighborhoods were named by the Housing Ministry officials. What we have is MKs interpreting something that was said to them," said Schneller. "The policy of Kadima, the policy of my party, is very clear regarding this issue. There will be no negotiation on Jerusalem." Jerusalem Mayor Uri Lupolianski added his voice to the fray on Monday, saying that a government freeze on construction in east Jerusalem would be "illegal." "Israel cannot be the first nation in the world that turns its capital into an illegal outpost," Lupolianski said in a statement. "This is an illegal decision that contradicts government law." Jerusalem opposition leader Nir Barkat also blasted the supposed decision. Etgar Lefkovits, Herb Keinon and Gil Hoffman contributed to this report.