Israel, March 14, 2010: Israeli Prime Minister Benjamin Netanyahu voiced regret Sunday for the announcement of a Jewish settlement plan that has strained ties with Washington and threatens the revival of Middle East peace talks.

In his first public remarks on what Israeli commentators called his most serious crisis with Washington since taking office a year ago, he gave no sign he would meet Palestinian demands to cancel a project for 1,600 new settler homes.

“I suggest not to get carried away and to calm down,” Netanyahu told his cabinet at its weekly meeting, after a reprimand by U.S. Secretary of State Hillary Clinton.

“There was a regrettable incident here, that occurred innocently,” Netanyahu said, referring to an announcement by a government ministry during a visit last week by U.S. Vice President Joe Biden, of planned construction in an area of the West Bank that Israel has annexed to Jerusalem.

The timing of the disclosure deeply embarrassed Biden, whose visit coincided with Palestinian agreement to restart peace talks suspended since December 2008 in the form of indirect, U.S.-mediated negotiations with Israel.

“It was hurtful and certainly it should not have happened,” Netanyahu said of the announcement by the Interior Ministry, controlled by the pro-settler, ultraorthodox Shas party, a partner in his governing coalition.

Netanyahu said he had appointed a team of senior officials “to pinpoint the sequence of events, to ensure procedures will be in place to prevent these kinds of incidents in the future.”