Prime Minister Ehud Olmert vowed on Wednesday that Israel would press on with settlement building on occupied Palestinian land despite international calls for a halt to the activity.At a meeting with the foreign press in Jerusalem, Olmert also said he expected to reach only the framework of a peace deal with the Palestinians this year and warned of "painful" action against Hamas to halt militant attacks from the Islamist-controlled Gaza Strip.
Israel's settlement activity is one of the major reasons why Israeli-Palestinian peace talks have made little progress since they were renewed at a US conference in late November.
But Olmert said: "There will be additional building as part of reality of life, and this fact was well explained to everyone involved."Israel's staunch ally Washington, along with other nations, have urged the government to refrain from settlement construction in the occupied West Bank and annexed east Jerusalem to give peace talks a chance.
Olmert also played down the chances of a comprehensive peace deal in 2008.
"What we are trying to achieve is to reach a very accurate outline and definition of all basic parameters of a two-state solution," he said.
"I think that the understandings about the basic parameters that will define accurately the outline of a two-state solution, such an understanding can be reached within the current presidency."
US President George W. Bush said during a visit to the Middle East that he hoped for a signed peace treaty that would lead to the creation of a Palestinian state before he left the White House in January 2009.
But negotiations have made little progress, with both sides accusing the other of neglecting their basic obligations.
And one factor that could hamper any peace deal is Hamas, which violently routed forces loyal to Abbas from Gaza in June after a week of ferocious street battles.
"We are not going to speak to Hamas, we are going to fight Hamas... there can be no compromise on this," Olmert said, hours after Gaza militants fired nine rocket against southern Israel.
"We will deal with Hamas in other ways, and those ways will be very painful," he said.
There has been a relative lull in violence in and around Gaza since Israel unleashed a wave of strikes in late February that left 130 Palestinians dead in a week. Five Israelis were killed over the same period.
In Ramallah, Abbas acknowledged that the talks had encountered "a number of obstacles" but pledged both sides were determined to succeed.
"Negotiations with the Israeli side are continuing and are covering all the questions related to the final status (of the Palestinian territories) without exception."
US Secretary of State Condoleezza Rice is due back in the region on Friday on her second trip in three weeks, while a senior Palestinian official also said Bush has invited Abbas to Washington on April 24.
Israeli Defence Minister Ehud Barak and Palestinian prime minister Salam Fayyad are due to discuss security issues at a meeting later on Wednesday where the local media said Israel would make a goodwill gesture towards the Palestinians.
Barak and Fayyad were to discuss specifics of an agreement in principle for the deployment of Palestinian security forces in the northern West Bank town of Jenin.
The peace talks are based on the internationally-drafted 2003 roadmap, which calls on Israel to freeze construction of settlements in the occupied West Bank and on the Palestinians to improve security.
Washington has repeatedly urged both sides to respect their roadmap commitments, and sent US Vice President Dick Cheney to Israel and the occupied West Bank last week to press home the message.
Israel captured and annexed east Jerusalem in 1967 and considers it part of its "eternal, undivided capital", a claim not recognised by the international community which considers all Israeli settlements on occupied Palestinian land to be illegal.
The Palestinians want to make the eastern part of the Holy City the capital of their promised state.
