Vice President Joe Biden told Palestinians on Wednesday that the United States intends to push ahead with its Mideast peacemaking effort, despite a diplomatic blow-up this week over Israel's plans to build 1,600 housing units in disputed East Jerusalem.

Biden met in the West Bank with the Palestinian Authority president and prime minister, emphasizing U.S. determination to act as the intermediary in new talks between Israelis and Palestinians. The vice president reiterated his criticism of Israel's housing announcement, and declared that Palestinians deserve a "viable" state.

In Israel, meanwhile, a partisan crossfire erupted over the government's housing move, which embarrassed Biden during a high-level visit intended to improve relations between the allies and prompted a statement by the Americans denouncing the Israelis.

Around the Middle East, the exchange was seen as proof that the latest peace initiative was doomed and that the U.S. protests were unlikely to lead to more strenuous action.

In an appearance with Palestinian Authority President Mahmoud Abbas at his headquarters in Ramallah, Biden again scolded the Israelis. He said U.S. officials "will hold both sides accountable for any statements or actions that inflame tensions or prejudice the outcome of talks, as this decision did."

Biden did not go as far as Abbas, who said the Israeli decision to move ahead on plans for 1,600 housing units in East Jerusalem "must be canceled."

Palestinian Authority Prime Minister Salam Fayyad thanked Biden for "the strong statements of condemnation" quickly issued by U.S. officials after publication of the new Israeli housing plan.

Arab League chief Amr Moussa said in Cairo that Abbas had told him he would not enter the planned indirect talks with Israel, according to Reuters news agency. Arab League delegates said the talks hinged on Israel halting settlement expansion in the West Bank and the building of Jewish homes in East Jerusalem.

Israel's housing announcement, made by the Interior Ministry late Tuesday, appeared to demonstrate the limits of American influence over events between the two sides.

The Israeli Interior minister apologized for the developments, but did not withdraw the housing plan.

"We had no desire, no intention, to offend or taunt an important man like the vice president on his trip," Eli Yishai, of the hawkish Shas party, told Israel Radio. "I am very sorry for the embarrassment. We need to remember that approvals are done according to the law, even if the timing was wrong. Next time we need to take the timing into account."

But liberal Israeli commentators and left-leaning politicians were furious about the incident.

"Why would Israeli officials degrade Israel by humiliating the vice president of the United States?" asked a commentator, Bradley Burston, in the liberal Ha- aretz newspaper.

Yishai's unwillingness to delay the housing announcement by several days, until Biden had left the country, "proves his goal was to give the American administration a slap in the face," Meir Margalit, a Jerusalem City Council member and member of the leftist Meretz party, told Haaretz.

Nonetheless, U.S. officials and private analysts said the setback would have little effect on American determination to mark even halting progress toward Middle East peace.

President Obama has said progress is crucial if the U.S. is to advance its broader goals in the region, including in the widening rivalry for influence with Iran. A U.S. official, noting Obama's previsous comments, said Wednesday, "Nothing changed on that this week."

Biden's visit dominated headlines and news broadcasts across the region, but the sight of the vice president embracing Israeli officials disappointed many skeptical Arabs.

"Biden has said that Washington is committed indefinitely to Israel's security," said an Egyptian radio commentary broadcast Wednesday. "Hence, the decision of Tel Aviv to build 1,600 [housing units] in eastern Jerusalem is not strange."

A correspondent on the pan-Arab news channel Al Jazeera said Biden's visit was primarily intended to reassure Israel that the U.S. would confront Iran.

But commentators said Washington's unqualified commitment to Israel's definition of its own security guaranteed the failure of any peace talks.

"The U.S. ignores Arab and Palestinian rights completely and makes Israeli security part of U.S. security," said an editorial in Egypt's pro-government Al Jumhuriyah. "Hence, it insists on destroying negotiations."

But some in the Arab news media noted the harsh criticism of Israel from Biden, who said Tuesday that he "condemned" the Israeli action, a word U.S. officials rarely use about Israel.

"He used very strong statements," said Radwan Abdullah, a Jordanian political scientist. "In a way, people are happy that Israel is being unmasked."