Palestinian leaders warned Thursday that Israel's announcement of plans to build new homes in Jewish settlements will trigger more suicide-bombings, and Islamic militants said they had thousands of volunteers for such attacks.

Prime Minister Benjamin Netanyahu pledged Wednesday night, during a visit to the West Bank settlement of Efrat, that his government would build 300 more homes there. Netanyahu was quickly reprimanded by Secretary of State Madeleine Albright, who said such construction was not consistent with the climate needed for resuming Israeli-Palestinian peace talks.As the war of words between Israel and the Palestinians escalated, the U.S. ambassador to Israel, Martin Indyk, said in his farewell speech that "the dream of peace some days seems to be turning into a nightmare."

Netanyahu apparently felt the time was right to announce the new settlement construction because the Palestinians are on the defensive over their failure to crush Islamic militant groups.

Earlier this week, Israel announced that, using DNA testing, it had identified four of five suicide-bombers involved in two recent Jerusalem attacks as Hamas activists from the West Bank village of Assira. Arafat had insisted that the bombers came from abroad.

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Arafat was further embarrassed when it turned out that the four bombers had walked out of a loosely guarded Palestinian jail last year and had been on a list of Islamic militants Israel wanted the Palestinian Authority to arrest.

Arafat has countered that he was not responsible because Assira and other West Bank villages, though administered by him, are under Israeli security control.

However, his security forces have arrested 20 Hamas activists, including four leaders, in the Palestinian-run town of Nablus, near Assira. Palestinian police also searched a Hamas-affiliated TV station in Nablus owned by one of the men detained, and tightened security around jailed Hamas activists.

A senior Palestinian security official said Thursday that Arafat was determined to crush the Hamas infrastructure in Nablus. The official, who spoke on condition of anonymity, said Palestinian security forces were also tracking five Assira men wanted by Israel in connection with the Jerusalem bombings on July 30 and Sept. 4.

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