Israel Prime Minister Benjamin Netanyahu found himself on the defensive after an unprecedented public assault by US officials over the weekend, as the diplomatic furor over new building in Jerusalem escalated.

Clinton call to Netanyahu: Israel settlement move a 'deeply negative signal' Joe Biden gives Israel bear hug – and tough love New wrinkle in Joe Biden agenda: 1,600 units in Israeli settlement With a succession of US officials calling the revelation of a project to build 1,600 homes in an area claimed by the Palestinians an "insult," Netanyahu may have to decide between allowing the open sore with Israel's most important ally to fester or potentially alienating right-wing allies in his coalition government.

"I think that Netanyahu is at a moment of truth," says Gideon Doron, a political science professor at Tel Aviv University. "He has to choose whether or not he wants to ignite the forces for peace, or whether he'll go against the US and play for time. He can't do that. It's suicide."

Where the Biden trip went wrong

On Friday US Secretary of State Hillary Rodham Clinton delivered a 43-minute scolding of Israel for its behavior during Vice President Joe Biden's visit to the region last week.

Mr. Biden's visit was intended to smooth over ties with Israel and help give momentum to renewed, indirect peace negotiations with Palestinians. But the trip was upended by the surprise announcement of a regional planning committee of a plan to add 1,600 homes in the ultrareligious neighborhood of Ramat Shlomo, which is located in a section of Jerusalem claimed by Palestinians as part of a future state.

The Palestinians immediately balked at talks and Biden issued a swift condemnation. Netanyahu apologized for the timing of the announcement but not the substance of the announcement.

"This was an affront, it was an insult but most importantly it undermined this very fragile effort to bring peace to that region," said President Obama's top adviser David Axelrod, on NBC's "Meet the Press" on Sunday. "For this announcement to come at that time was very destructive."

Obama administration cries foul

It wasn't enough for the Obama administration, which summed Israel's ambassador to Washington to the State Department for a protest. The US is now reportedly calling on Israel to cancel the project at Ramat Shlomo to show its commitment to the peace process, or risk a deterioration in ties.

Netanyahu said at a cabinet meeting that he had commissioned a committee that would prevent future flare-ups. The Haaretz newspaper reported, meanwhile, that pending building projects in East Jerusalem had been wiped off the agenda of the regional planning board responsible for the project.

A more dramatic concession risks defections among Netanyahu's coalition partners and instability within his own Likud Party.

Netanyahu: Let's calm down

"First of all, I suggest that we not get carried away – and that we calm down," Netanyahu said.

So far the damage control isn't working.

Netanyahu is being portrayed in the local press as the instigator of an unnecessary crisis. His performance in the crisis is being compared to his first term in office, which was cut short as he alienated the US and coalition allies. One of the chief criticisms is that he can't go with the Obama administration's negotiations initiatives with his current coalition.

"Israel-US relations will survive this uproar as well. They are stronger than Netanyahu, stronger even than Obama," wrote columnist Ben Caspit in the Maariv newspaper. "The thing is that the intimacy and trust are not going to be restored to their former states. Not in the coming year or two. And the coming year or two is the period of time in which Israel needs intimacy with America in the most desperate, most existential, and most critical way since it was established.''