Palestinians watch as the Hotel Shepherd is torn down, East Jerusalem (9 Jan 2011) Palestinians accused Israel of trying to "erase" them from the city

Israeli bulldozers have demolished part a hotel in East Jerusalem to make way for 20 new homes for Jewish settlers.

The destruction of the Shepherd Hotel has angered Palestinians, who want East Jerusalem as the capital of a future Palestinian state.

Palestinian President Mahmud Abbas said Israel was destroying any chance of returning to peace talks by carrying out the demolition.

Israel says it has a right to build homes in any part of the city.

The Shepherd Hotel was built in the 1930s and was once home to Amin al-Husseini, the Grand Mufti of Jerusalem who became an ally of Adolf Hitler in WWII.

Its current ownership is disputed - Israel says it belongs to a Jewish-American property developer but Palestinians say it was seized illegally after Israel occupied East Jerusalem in 1967.

"By doing this, Israel has destroyed all the US efforts and ended any possibility of a return to negotiations," said Nabil Abu Rudeina, a spokesman for Mr Abbas.
'Erase identity'

Attempts by the US to revive peace negotiations stalled last year, after Israel refused to end settlement building on occupied Palestinian land.

"Israel has no right to build in any part of east Jerusalem, or any part of the Palestinian land occupied in 1967," said Mr Abu Rudeina.

The Palestinian governor of Jerusalem, Adnan al-Husseini, said it was the latest in a line of demolitions of historic buildings and accused Israel of "trying to erase any Palestinian identity from the city of Jerusalem".
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View of East Jerusalem (photo: Martin Asser)

* Obstacles to peace: Jerusalem

The US had criticised the project as far back as 2009, when building approval was granted.

But Israeli officials said the demolition had been carried out legally and defended its decision.

"This is something that every country does in its own domain without the necessity to give any report to any other government," said the minister for national infrastructure, Uzi Landau.

Nearly half a million Jews live in more than 100 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem.

The settlements are considered illegal under international law, although Israel disputes this.

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