Jerusalem, Oct 27 (IANS/EFE): Israeli Prime Minister Benjamin Netanyahu has ordered the planning of 1,000 new housing units in East Jerusalem, along with more infrastructure in the West Bank, Israeli sources said Monday.

"The government has decided to advance plans for 1,000 housing units in East Jerusalem, 400 in the Har Homa neighbourhood and 600 in Ramat Shlomo," sources from the prime minister's office told Efe news agency.

Both territories have been occupied by Israel since 1967.

The sources, who requested anonymity, said that infrastructure projects are also planned in the West Bank to serve the Palestinians.

The announcement followed a report Sunday by Israel's Channel 2 that Netanyahu had planned to give the green light to at least 2,000 homes in the West Bank, as well as projects such as paving roads and building parks and industrial zones.

Israeli Finance Minister Yair Lapid criticised the initiative because "at this stage it would lead to a serious crisis in ties with the United States, and it would harm Israel's international standing".

"Plans for more construction, even if it's in the settlement blocs, under such sensitive circumstances that we find ourselves in, is irresponsible from both a diplomatic and security standpoint," Justice Minister Tzipi Livni said, reacting to the report of Channel 2.

The Israeli Labour Party said in a statement that Netanyahu was "selling the State of Israel's diplomatic interests in exchange for more months in the prime minister's chair".

"If this is Netanyahu's idea of a solution to the diplomatic crisis and to the high cost of housing, then he has completely lost direction," the statement read.

According to Israeli media, Netanyahu's decision is due to the strong pressure mounted by Economy Minister Naftali Bennett, leader of the right-wing religious political party The Jewish Home, and Housing Minister Uri Ariel.

Israel captured the West Bank, East Jerusalem and Gaza during the Six-Day War in 1967, territories in which the Palestinians want to establish a state.

The announcement of 1,600 new housing units in Ramat Shlomo in 2010 during the visit of US Vice President Joe Biden to Israel caused a diplomatic crisis between the two allies.

The project was temporarily suspended in response to US pressure, but it was discussed again late in 2012, after the UN General Assembly recognised Palestine as a state.