Salam Fayyad, the Palestinian Authority prime minister, defiantly toured Israeli-controlled land in the West Bank yesterday, vowing to rebuild a road that Israel recently destroyed in the area.

Near the northern village of Bani Hassan, the two-kilometre, PA-built road falls on a swath of land that the represents roughly 60 per cent of the West Bank. Although under Israel's exclusive authority, the Palestinian leader's pledge to rebuild the motorway is part of his effort to defy Israel's control over the area that he has called necessary for building an independent Palestinian state.

"We are going to rebuild this road and do it quickly," he told a group of villagers as he examined the damage. "And if they are going to destroy it again, we will build it again, and we will pursue development in every square inch of our territory."

His tour is the latest in a stepped-up campaign by Palestinian leaders to assert their claims on the disputed territory as direct peace negotiations with Israel are on the verge of collapse.

Although they resumed on September 2, the talks were effectively suspended three weeks later when Israel refused to extend a partial freeze on settlement construction in the West Bank.

Earlier this month, Mr Fayyad said the PA had financed the renovation of 14 schools in East Jerusalem - in defiance of Israel's control over the disputed area.

On Monday, his boss and PA president, Mahmoud Abbas, warned that Israel's settlements on occupied land had become "a time bomb" for the peace process. Israel seized, and since controlled, both East Jerusalem and the West Bank following the 1967 Arab-Israeli war; both areas Palestinians want to form their future state.

In a message read at the United Nations in New York, Mr Abbas said that "the deterioration in the peace process must be addressed."

"This requires bringing a decisive and final end to the vicious Israeli settlement campaign," he said, adding that Israel's settlements "constitutes a time bomb that could destroy everything we have accomplished on the road to peace at any moment".

Israel's UN ambassador, Meron Reuben, responded sharply to Mr Abbas' criticism, saying it "takes two to tango, Israel cannot reach this peace on its own."

"We can only achieve peace with the Palestinians through compromise and direct and bilateral negotiations," he said. "We can only move forward through bilateral negotiations that address the concerns of both sides."

Meanwhile, on Monday, the Jerusalem Local Planning and Building Committee approved construction on 130 new housing units near Gilo, an Israeli settlement located on the outskirts of Jerusalem. The plans have also sparked controversy among both Palestinians and Israelis, in the latter's case because the land had previously been allotted for the construction of hotels.

Saeb Erekat, a senior Palestinian negotiator, condemned the announcement, saying in a statement that Israel was pushing "its agenda to further isolate Bethlehem from occupied east Jerusalem".

The announcement has also sparked controversy for moving ahead despite a Jerusalem Municipality rule that forbids re-zoning land originally designated for hotels for residential purposes, the English-language version of Yediot Ahronot, an Israeli daily newspaper, reported on Monday.

Yossef Alalo, a Jerusalem councilman, opposed the plan for reasons "both political and professional".

"Politically, it will influence ties between Israel and the Palestinians, and professionally, there is no doubt that this is a direct continuation of Holyland."

However, Elie Isaacson, a spokesman for the Jerusalem mayor, Nir Barkat, said the plans would go on despite the controversy.

"The municipality of Jerusalem will continue to build in all areas of the city, both for Jews and for Arabs, according to the overall plan, likewise in the neighbourhood of Gilo," he said.