Israel was straying further outside of the international consensus and damaging its credibility as a serious partner for peace, chief PLO negotiator Saeb Erekat said in a statement on Wednesday.

The PLO official's comments follow Israel's decision to build in the flashpoint Palestinian neighborhood of Sheikh Jarrah at the site of the former Shepherd Hotel, in occupied East Jerusalem.

Ereket pointed to growing international frustration over Israel's continued settlement policy in a statement, after two announcements in the past two weeks derailing proximity talks with Palestinian leaders and even destabilized relations between Israel and the United States.

"If Israel is serious about negotiations, then why not stop illegal settlement construction as the international community is calling for and the Road Map demands, especially when every effort is being made to start proximity talks? Why continue doing what Israel is doing when everyone is urging Israel to do what is right and what is needed if peace is to have any chance," Erekat asked.

"Israel is digging itself into a hole that it will have to climb out of if it is serious about peace. There is overwhelming international consensus on the illegality of Israel’s settlements, including in East Jerusalem, and the damage they are doing to the two-state solution."

The Shepherd Hotel is the home of the late Haj Amin Husseini, the former Mufti of Jerusalem, who was deported to Lebanon in 1948. In 1967, his home was confiscated as “absentee property” by Israel following Israel’s occupation of East Jerusalem. Following its confiscation, title to the property was illegally transferred to the Israeli company “Amidar,” which in turn sold it to Irving Moskovitz in 1985. The hotel was subsequently rented for a period of seven years to the Border Police for use as a base.

Plans were submitted to construct a new Israeli settlement on the site, consisting of 90 housing units, as well as a synagogue, a kindergarten and a children’s park. The whole complex will be approximately 10,000 square meters in size. The new settlement is slated to house up to 500 new settlers, and on Tuesday the Israeli municipality of Jerusalem gave the go-ahead for the construction of 20 new Jewish-only units.

"These new settlement units are part of Israel’s attempt to forcibly end any Palestinian presence in East Jerusalem, and to foreclose any hope of reaching agreement on the core issue of Jerusalem in line with international law. This is not only occurring in Sheik Jarrah, but in Silwan and other areas of occupied East Jerusalem," Erakat said.

The PLO official added that Israel is not being asked to make concessions. "Rather it is being asked to make a decision about whether or not it is serious about peace. Rolling back the occupation, ending illegal settlement construction, and adhering to international law and existing agreements are not concessions. They are crucial components of a just and lasting peace."

Erekat concluded by saying that the PLO wants to "give proximity talks every chance of success if and when they take place. We want Mitchell We want Mitchell to succeed, because his success is our liberty. Negotiations are not an end in themselves, however, but a means to an end."

The goal, he said, was an end to Israel's occupation and "a just and agreed solution for Palestinian refugees," the establishment of a viable independent Palestinian sate on 1967 borders. "The Israeli government is yet to come around to this realization, particularly when you look at what it is doing on the ground, and the positions it continues to take on core issues such as Jerusalem and settlements, as well as water, security, borders and refugees."