JERUSALEM: Prime Minister Benjamin Netanyahu yesterday said Israel will continue to expand settlements in the occupied West Bank despite calls by the United States to stop.

He also referred to a “Palestinian state” for the first time since re-assuming his post on March 31, but stopped short of backing the principle that is the cornerstone of international Middle East peace-making efforts.

“I have no intention to construct new settlements, but it makes no sense to ask us not to answer to the needs of natural growth and to stop all construction,” a senior official quoted him as telling the Cabinet.

During Netanyahu’s first official visit to Washington last week, US President Barack Obama told him that “settlements must be stopped,” a call echoed by other senior administration officials and on Capitol Hill.

Israeli settlements in the West Bank are one of the major stumbling blocks in the Middle East peace process, which Obama has vowed to push forward despite a new largely right-wing government in Israel that backs settlements.

Briefing the ministers on his Washington trip, Netanyahu said that “clearly we need to have some reservations about a Palestinian state in a final status agreement ... when we reach an agreement on substance, we will reach agreement on terminology.” It was the first time since he returned to the prime minister’s post that Netanyahu publicly said the words “Palestinian state.”

“If we talk about a Palestinian state, we have to first and foremost verify what kind of sovereignty and rights this state will have,” a senior official quoted Netanyahu as saying. “We have to make sure that we are not threatened.”

Earlier yesterday Foreign Minister Avigdor Lieberman ruled out a return to Israel’s pre-1967 borders, saying such a move would not end the conflict, would not guarantee peace or security. “It would simply move the conflict to within the ’67 borders,” he said, referring to Israel.

Israel seized the West Bank, Gaza Strip, Golan Heights and East Jerusalem during the 1967 Six-Day War and, except for Gaza, continues to occupy the territories that today are home to about half a million Jewish occupiers.

The new Israeli Cabinet largely opposes dismantling the settlement outposts, an idea to which the Jewish state committed itself under the road map.

The settlement issue is sure to come up this week when Palestinian President Mahmoud Abbas goes to the White House. Abbas has said there is no point in meeting with Netanyahu unless he freezes settlement construction and agrees to open negotiations on Palestinian independence.