Israel deflected growing international demands for a settlement freeze yesterday, saying the issue should be dealt with in future peace talks with the Palestinians.

On Friday, the Quartet of Mideast mediators and foreign ministers from the Group of Eight industrialised nations, meeting in Italy, called for a halt in construction. They rallied behind President Barack Obama, who seeks a freeze but has encountered Israeli resistance.

Israel argues that it should be allowed to keep building to accommodate 'natural growth' in settlements, built on lands the Palestinians want for a future state. The Palestinians won't resume peace talks with Israel without a freeze, saying the ongoing building pre-empts the outcome of negotiations. Under the US-backed 'road map' plan, Israel is required to halt construction.

Israeli Foreign Ministry spokes-man Yigal Palmor said Saturday that settlements should be left to future negotiations. "The best way to solve this problem is to resume at once bilateral Israeli-Palestinian talks," Palmor said.

Israeli officials say they are trying to find a formula agreeable to Washington that would allow at least limited construction.

Palestinian officials say such a compromise would undermine US credibility.

"The stalemate with Israel will continue if settlement growth does not stop," said Nabil Abu Rdeneh, an aide to Western-backed Palestinian President Mahmoud Abbas.

attempt to reconcile

Meanwhile, rival Palestinian factions - Abbas' Fatah and the Islamic militant Hamas - launched another attempt to reconcile. Hamas overran Gaza two years ago, ousting forces loyal to Abbas, who has since only controlled the West Bank.

Reconciliation is seen as key to ending a two-year blockade of Gaza's borders, enforced by Israel and Egypt, and to reaching a Mideast peace deal.

Hamas and Fatah negotiators were en route to Cairo yesterday, with the Egyptian-brokered talks to begin today.

brief opening

Also yesterday, Egypt briefly opened its border with Gaza. Some 5,000 Gazans signed up to leave over the next three days. Most of those trying to leave were medical patients seeking treatment abroad and Gazans holding foreign residency.

The closure has trapped some 1.4 million people in Gaza.

Egypt opens the crossing periodically. Israel allows in food and humanitarian aid, but won't allow raw materials that the Gaza Strip needs to repair damage from Israel's winter war on Hamas, meant to stop militant rocket fire on Israeli towns.