US Secretary of State Condoleezza Rice's harsh criticism of Israel's plan to continue building in east Jerusalem met with little panic and no formal response on Sunday, a sign - one government source said - that with less than five months to the US elections, "it is not that important what she says anymore." "Comments that in the past would have set everybody abuzz, are not making much waves today," the source said. He attributed this both to the waning days of George W. Bush's administration, and a growing realization that the chances of finalizing any "shelf agreement" with the Palestinians by the end of 2008 are slim, largely because of the political instability in Israel. The source said that if the government could not make a decision on the cease-fire agreement in the Gaza Strip because of political considerations, as Defense Minister Ehud Barak has charged, then even less so would it be able to make the even more complicated decision about signing a final-status agreement with the Palestinians. The source said that Rice's particularly stern comments about the construction in the settlements and east Jerusalem were an indication of frustration that after 21 visits to the region as secretary of state, she was facing the prospect of leaving office in January without an agreement here. Rice, during each of her public appearances on Sunday, criticized Israeli construction activity. In comments made before meeting with Foreign Minister Tzipi Livni in the morning, Rice said, "I've told the foreign minister that I will also raise the issue of settlements, because I'm very concerned that at a time when we need to build confidence between the parties, the continued building and the settlement activity has the potential to harm the negotiations going forward." And then, after meeting with Palestinian Authority President Mahmoud Abbas in Ramallah, she said that while the US remained committed to the target date of completing a shelf agreement by the end of 2008, Israeli construction plans were hurting the negotiations. "It's important to have an atmosphere of trust and confidence," Rice said. "Unfortunately I do believe, and the United States believes, that the... announcements taking place are having a negative effect" on talks. The Interior Ministry announced plans on Friday to build 1,300 homes in the Jerusalem neighborhood of Ramat Shlomo, which is just beyond Jerusalem's 1967 lines. And on Sunday, the Jerusalem Municipality announced that a city plan to build tens of thousands of new apartments over the next 12 years, including a couple of thousand in Jewish neighborhoods in east Jerusalem, had received final approval. That included the 1,300 announced on Friday. Rice, in a briefing to her traveling press later in the day, said she did not anticipate any "blinding breakthroughs" on the construction. Prime Minister Ehud Olmert's spokesman Mark Regev said Israel drew a clear distinction between building in Jerusalem, and building in the West Bank. "It is clear that the Jewish neighborhoods of Jerusalem will remain part of Israel," he said. "It is not realistic that we freeze the lives of people in Jerusalem." In her comments after meeting with Abbas, Rice voiced frustration over the slow pace of negotiations. "This is not easy; it has not been easy at any time," she said. "If it had been easy, I think we would have probably ended this conflict by now and had an agreement." She noted only minor improvements in the quality of life for Palestinians in the West Bank, where travel and commerce are hindered by a network of IDF roadblocks set up for security reasons, as well as Israel's failure to remove unauthorized settlement outposts. "I recognize that we haven't made the progress that we would like to in terms of movement and access and removal of barriers," she said. "Particularly, I am concerned about the outposts, which are illegal, even under Israeli law, and so I would hope to see more movement." Rice held a dinner meeting Sunday evening with Olmert, and earlier in the day, in addition to meeting with Livni, also met with Barak and held a trilateral meeting with Livni and the head of the Palestinian negotiating team, former PA prime minister Ahmed Qurei. She is scheduled to hold another trilateral meeting with Barak and PA Prime Minister Salaam Fayad on mutual road map obligations, and the settlement construction issue is expected to be a major focus. She is scheduled to return to Washington later on Monday. Dani Dayan, who heads the Council of Jewish Communities of Judea, Samaria and the Gaza Strip, attacked Rice's comments. It was "impertinent and insolent" on her part to scold Israel for providing housing for its citizens in the heart of the capital, Dayan said. "But most of the blame lies with the government of Olmert and Tzipi Livni, who have treated the way that Israel has been spat at in the face as if it were rain drops. "When the Olmert-Livni government began, it prided itself on an understanding with the US president over the future of the settlement blocs in Judea and Samaria. It's a sign of this government's failure that within two years it has managed to lose international support even over [Jerusalem neighborhoods such as] Gilo, Ramot and Pisgat Ze'ev," Dayan said. It should have been clear to Olmert and to Livni that a construction freeze in Judea and Samaria would only move the diplomatic struggle into Jerusalem, he said. Now the construction of a porch in the Jerusalem neighborhood of Ramat Eshkol has become a matter of urgent debate in the United Nations, Dayan said. Tovah Lazaroff and AP contributed to this report.