Despite angry statements from the Palestinians and the Arab world, and condemnations from the US and the EU, Israel's announcement Monday of new housing starts in the settlements did not derail the diplomatic process; US envoy George Mitchell is expected here Saturday night, and Prime Minister Binyamin Netanyahu is scheduled to fly to Egypt for talks on Sunday. "The settlements aren't the be-all, end-all" of American policy efforts, one State Department official told The Jerusalem Post on Tuesday. "Our ultimate goal [is] to create the conditions for negotiations." The official said that while the new West Bank construction didn't help reach that goal, "this doesn't mean we're going to stop working toward setting the conditions for negotiations." Diplomatic sources said Netanyahu will talk to Egyptian President Hosni Mubarak about several topics, including the diplomatic process, possible normalization gestures from the Arab world, the situation in Gaza, and Egyptian activities along the border to prevent arms smuggling. The Kuwaiti newspaper Al Jarida, which on Tuesday first reported the visit, said that the two leaders would discuss Iran. Recent comments by Arab League General Secretary Amr Moussa called on the Arab world to reject normalization with the Jewish state. On Sunday, Moussa, speaking in Cairo alongside Hamas head Khaled Mashaal, warned there would be a harsh response to any Arab country making gestures to Israel. "It is impossible to talk of normalization when Israel refuses to take real steps," Moussa said. "No Arab state will offer Israel gifts on a silver platter." Egypt's Foreign Minister Ahmed Aboul Gheit, however, took a softer line Tuesday, saying the Arab world may normalize ties with Israel, but only if Israel froze construction in the settlements and renewed negotiations with the Palestinians. "If Israel takes a big step towards the Palestinians, a step which will reflect its honesty and willingness for serious negotiations, only then will Arab countries take their own steps and be ready to accept normalization," he said. Defense Minister Ehud Barak, meanwhile, phoned Mubarak on Tuesday to send Ramadan wishes. According to his office, the two discussed the diplomatic process and Egypt's role in moving the negotiations with the Palestinians forward. Earlier in the day Barak, who signed onto the decision to approve 455 housing units before a moratorium was declared, said that "freezing [settlement] construction is a correct national priority." Speaking at a toast for Rosh Hashana, Barak told heads of local councils that "regarding the settlements, we need to act wisely and responsibly, not with harsh words and violence." He said "we want to reach an agreement with the Palestinians based on the two-state principle, while safeguarding Israel's security interests. We are entering a year of diplomatic opportunities and we mustn't miss them." Some council heads from Judea and Samaria boycotted the toast, held in the Kirya military headquarters in Tel Aviv, citing the government's decision to freeze construction in the settlements as the reason. Netanyahu's visit to Egypt will come a week after senior Hamas officials, including Mashaal, were in Egypt to discuss a prisoner swap for kidnapped soldier Gilad Schalit, as well as the possibility of relaunching of Hamas-Fatah reconciliation talks. Israeli government officials would not say if Netanyahu's visit was connected to Schalit. A week later Netanyahu is scheduled to fly to New York for the UN General Assembly meeting, and a possible meeting with US President Barack Obama and Palestinian Authority President Mahmoud Abbas. According to diplomatic officials, since last Thursday night's announcement by the Prime Minister's Office that it would authorize a few hundred new units in the settlements, and then implement a moratorium on new building, Israel has been explaining to various interlocutors around the world that there had been no new housing authorizations since last November, and "pressure was building up." The official said an effort was made to explain abroad that this move was necessary to allow for the possibility of a package deal to launch a new diplomatic process that would include a settlement moratorium. David Makovsky, a policy expert at the Washington Institute for Near East Policy, said of the US response to Israel's announcement that "The US can't sound like it's going to support [the settlement construction], but I don't think we've heard complete vehemence. That suggests that the US doesn't see this as a dealbreaker." And while Palestinian and Arab officials have lashed out at the decision, they've stopped short of pulling out of the process. "It's not going to be fatal to anything. It just complicates things," said Gaith Al-Omari, advocacy director for the American Task Force on Palestine. He pointed to the higher domestic political price Abbas would have to pay to participate in any talks with Israel and the hit to Mitchell's credibility for not being able to deliver a complete settlement freeze from the Israelis. But Al-Omari said that even so, the timing doesn't provide for much flexibility, with an initial meeting between Netanyahu and Abbas tentatively planned along the sidelines of the opening of the United Nations General Assembly in New York later this month. Since the two leaders are scheduled to be at the event, having a meeting in this context is easier to arrange, as it carries less political baggage than a one-on-one meeting outside the international context.