Government paradox

Whether this was a deliberate act or not, it is the latest in a series of apparent blunders by Israeli leaders, whereby they send out mixed messages to the Palestinians, to Arabs in the region and to their American intermediaries.

It also points to the "great paradox of this government," said Hazan.

"On the one hand it says it wants peace, on the other it does whatever it can to prevent it," she explained.

These types of moves do quite the reverse of what is needed right now, according to Hazan, and that is confidence-building measures.

One of the problems for Netanyahu is that all such acts reflect on the entire government and its policies. Even if the Ramat Shlomo decision was taken at the regional planning level, its repercussions are tremendous.

Much of the problem is down to the unwieldy coalitions of Israeli government, which makes it difficult for Netanyahu to have full control of his ministers, said Jonathan Rynhold, a senior research associate at the Begin Sadat Center for Strategic Studies near Tel Aviv.

"There's no doubt that these kinds of things, whether they're serious or not in real terms, erode our political capital for no real gains," said Rynhold.

He thinks that American pressure though will make individuals within the government think twice before they do anything to upset the apple cart.

Netanyahu's alternative

For the time being, these blunders will send out the wrong messages but will not necessarily mean the end of the road for peace talks, some analysts suggested. The Americans, for example, may be able to live with the Ramat Shlomo project because it doesn 't encroach on Arab residential areas.

However, Rynhold warned that in the long term the current Israeli government will have to make way for a more dovish coalition if Israel wants to continue in talks on a permanent status agreement with the Palestinians.

Another hard time for the hawkish Netanyahu government would be during the summer when the 10-month partial Israeli construction freeze in the West Bank settlements comes to an end and the international community will no doubt demand an extension, he said.

Should Netanyahu's current coalition partners quit his government because he chooses to continue down the path of negotiations, "he would need a different government and we would get it without any difficulty at all," said Rynhold.

Hazan agrees that if Netanyahu really wants to advance the peace process he will eventually have to select an alternative ministerial line up. "But first he has to show that preparedness," she said.