The Cabinet approved a range of housing subsidies and loans for more than 600 Israeli communities deemed "national priority areas," expanding an earlier list. The list includes poor towns in Israel's outlying areas, but also dozens of settlements.
The Palestinians want to establish a state in the West Bank, Gaza and east Jerusalem, lands Israel captured in 1967, and the renewed talks are to draw Israel's borders with such a state.
Israel's government hopes to encourage more people to move to the communities on the "national priorities" list. The last version of the list was approved in 2012.
The Israeli anti-settlement group Peace Now said the list approved today increased the total number of settlements eligible for subsidies from 85 to 91, virtually all in areas Israel would likely have to evacuate to make way for a Palestinian state.
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Lior Amihai of Peace Now said three of the settlements added to the list had begun as rogue settlements that were established without formal government consent and then legalized retroactively.
"This is exactly what Israel wants, have a process for its own sake, and at the same time have a free hand to destroy the objective of the process," he said. "This will have a destructive impact (on the talks), and it seems to me it's up to the sponsors, the United States and the international community, to make Israel desist immediately."
Israeli government spokesman Mark Regev said that in the case of settlements, any housing or infrastructure subsidies require additional government approval.
"To include settlements that until recently were illegal, when it's doubtful that they will remain a part of Israel, and to disproportionately invest in them I think it is not the time, politically speaking and socioeconomically speaking," Environment Minister Amir Peretz told Israel Radio.