The Israeli Minister of Housing, Ze'ev Boim, told Israeli media outlets on Tuesday that the Israeli government will not freeze construction of settlements in the city of Jerusalem.He added that Israeli Prime Minister Ehud Olmert ordered a halt in expansion of West Bank settlements, except those surrounding Jerusalem. Hinting at future strategy, Boim further said that Prime Minister Olmert had halted those settlements that did not meet his approval.

The office of the Israeli prime minister announced to media agencies that Olmert had not ordered a freeze on settlement activity in Jerusalem. The statement added that the premier had asked to be informed of the ongoing constructions plans, as to avoid any surprises in diplomatic circles.

Israel occupied Jerusalem, the rest of the West Bank and the Gaza Strip in 1967. During the Oslo peace agreement, Gaza and the West Bank – without Jerusalem – were handed over to the Palestinian Authority. Palestinians continue to see Jerusalem as their capital. The UN still considers the city of Jerusalem as a city under military occupation.

Israel plans to complete the "Greater Jerusalem" project at top speed. Made publicly known in the 90's, the project aims to change the demographics of Jerusalem, with a target of a 90% Jewish – 10% Palestinian ethnic split. The process involves denying building licenses for Palestinians of Jerusalem, constructing settlements and building the wall around the city, enclosing existing Israeli settlements, and routing the Palestinian communities out of the city.

At the Annapolis conference in late November 2007, Palestinians and Israelis agreed to reinstate the stalled peace talks on the basis of the 2003 US "Road Map Peace Plan". The 'Road Map' states that Israel should halt its attacks, settlement construction and remove military checkpoints; in return the Palestinian Authority will stop all armed resistance against Israel.

The Israeli online daily, Haaretz, published a report on Tuesday saying that the Israeli municipality of Jerusalem is planning to build a further 10,000 housing units on settlements in and around the city of Jerusalem. Jerusalem, settlements, refugees, water and political detainees have been the main stumbling issues between the Palestinians and Israelis in past political agreements.