United States administration officials have voiced harsh criticism over advertisements in favor of Israel's position on Jerusalem that appeared in the U.S. press with Prime Minister Benjamin Netanyahu's encouragement. The authors of the most recent such advertisements were president of the World Jewish Congress Ronald Lauder and Nobel Peace Prize laureate Elie Wiesel. "All these advertisements are not a wise move," one senior American official told Haaretz.

In the advertisement, Wiesel said that for him as a Jew, "Jerusalem is above politics," and that "it is mentioned more than 600 times in Scripture - and not a single time in the Koran." Wiesel called to postpone discussion on Jerusalem until a later date, when there is an atmosphere of security allowing Israeli and Palestinian communities to find ways to live in peace.

The ongoing confrontation with the U.S. administration over construction in East Jerusalem was present in many of the comments made by senior Israeli officials during Independence Day.

Netanyahu himself said in an interview to ABC that freezing construction in the east of the city was an impossible demand, and refused to answer questions on the Israeli response to demands from Washington. Instead, he called on Palestinian Authority chairman Mahmoud Abbas to return to the negotiating table without preconditions.

Foreign Minister Lieberman, meanwhile, made Jerusalem the focal point of his speech in a festive reception for the diplomatic corps at the President's Residence in Jerusalem. President Shimon Peres spoke first, calling for progress in the diplomatic process. Lieberman, who took the podium immediately after Peres, made diametrically opposed statements in his speech, stressing that the Palestinian Authority is no partner for peace.

"Jerusalem is our eternal capital and will not be divided," Lieberman said. Many of the ambassadors in the audience left feeling stunned and confused, some of them told Haaretz. "The gap between Peres and Lieberman is inconceivable," one of them said. "We couldn't comprehend how Lieberman can say all that in front of all the international community delegates."

Speaking at the torch-lighting ceremony on Mount Herzl on Monday, Knesset speaker Reuven Rivlin said that there was "an attack on Jerusalem" and that Israel "will not apologize for the building of Jerusalem, our capital."

The diplomatic freeze and crisis with the Americans fueled a heated meeting of Labor Party ministers on Sunday. Minister Benjamin Ben-Eliezer, Isaac Herzog and Avishay Braverman told Defense Minister and party chairman Ehud Barak that unless there was some movement on the diplomatic front within weeks, the Labor Party should consider leaving the government or working to bring in Kadima.

Senior Labor officials, who declined to be named, said this was the first time the diplomatic freeze was being discussed between Labor ministers. "They main message coming from this discussion is that things can't go on like this," one senior Labor official told Haaretz. "The Labor ministers told Barak that we will be approaching a moment of political decision within weeks."

Barak tried to calm the ministers, saying he was concerned by the state of Israeli-American relations and will travel to Washington next week for talks on the peace process. Barak appears to be set to meet with Secretary of State Hillary Clinton, special U.S. envoy George Mitchell and national security advisor General Jim Jones.