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JERUSALEM – Israel's deputy prime minister said Tuesday the Obama administration's call to freeze West Bank settlement construction undermines past agreements between the U.S. and Israel and damages American credibility.

The comments by Dan Meridor underscored the growing rift between Israel and the U.S. over construction in the settlements. Meridor, a respected veteran of Israeli politics, is considered a moderate voice in the new Israeli government.

President Barack Obama has urged Israel to halt all settlement construction as a confidence-building move to restart stalled peace negotiations.

Israeli Prime Minister Benjamin Netanyahu has said he would not build any new settlements, but that construction must be permitted inside existing settlements to accommodate what he calls "natural growth" in their populations. Nearly 500,000 Israelis now live in the West Bank and east Jerusalem — areas captured by Israel in the 1967 Mideast war and claimed by the Palestinians as part of a future independent state.

Israeli officials and former White House official Eliot Abrams have cited a series of written and oral understandings reached with the Bush administration that appear to permit limited settlement construction.

Speaking to foreign reporters, Meridor, who is one of six deputy premiers under Netanyahu, said it was important for these understandings to be honored. Otherwise, it would raise questions about the legitimacy of future agreements, he said.

"We never had an agreement with the previous administration. We had an agreement with America," he added. "The agreement we had with the Americans is binding on us and them ... They should keep to the agreement."

Netanyahu, known for hard-line views toward the Palestinians, recently endorsed the U.S. goal of establishing a Palestinian state alongside Israel as part of a peace deal, though shackled by conditions. However, the Palestinians, encouraged by the firm U.S. stance on settlements, have refused to resume talks until Netanyahu halts settlement construction.

"What is required from Israel is to freeze all settlement activity," Palestinian President Mahmoud Abbas said in the West Bank Tuesday. "When Israel meets these demands, we will be ready to go to the final negotiations."

The EU issued a statement Tuesday calling on Israel to stop what it termed "provocative" actions in Jerusalem, like demolition of some Palestinian homes. These, "combined with the increase in settlement activity in east Jerusalem, further threaten the chances of peace," the statement said.

Jerusalem city hall has said that the destroyed homes were built without permits.

Meridor hoped the differences over restarting peace talks would soon be bridged.

"In the coming weeks, I think that we will see, I certainly hope so, the resumption of negotiations," he said. He noted that Palestinians conducted three years of negotiations with Netanyahu's predecessor, Ehud Olmert, while settlements expanded.

As he spoke, settlers rampaged in the West Bank for a second day, cutting down some 40 olive trees belonging to Palestinian farmers in the village of Burin, said Mayor Ali Eid. The Israeli military said it received reports of the rampage, but by the time troops arrived, the settlers had fled.

Extremist settlers often vandalize Palestinian property to protest Israel's removal of small, unauthorized outposts in the West Bank — a tactic they call the "price tag."