BENJAMIN Netanyahu has lashed out at an aid group's "hypocrisy".
The remarks came after a report found Palestinians in the West Bank lack basic amenities and are being forcibly displaced by discriminatory Israeli policies.
The Israeli Prime Minister accused New York-based Human Rights Watch of bias, after it called on Washington to penalise Israel by withholding from its massive annual aid a sum equal to the amount the Jewish state gives in subsidies to West Bank settlements.
The 166-page report, released yesterday, accuses Israel of depriving the Palestinians of services that are offered to Jewish settlers, who live in communities considered illegal under international law.
"Palestinians face systematic discrimination merely because of their race, ethnicity and national origin, depriving them of electricity, water, schools and access to roads," HRW representative Carroll Bogert said. "While Israeli settlements flourish, Palestinians under Israeli control live in a time warp, not just separate, not just unequal, but sometimes even pushed off their lands and out of their homes."
Israel denied the findings: "We must expose the hypocrisy of human rights organisations that turn a blind eye to the most repressive regimes in the world -- regimes that stone women and hang gays -- and instead target the only liberal democracy in the Middle East."
A government spokesman, Mark Regev, charged "that Human Rights Watch has allowed an anti-Israel agenda to pollute its objectivity". He said there had been "unprecedented levels of growth and development on the part of the Palestinian Authority in the West Bank" over the past two years.
"Anyone who looks at objective data can see this. Israel is committed to working with the Palestinian Authority upon this path that is beneficial to all."
But the report's author, Bill Van Esveld, said the study exposed a two-tier system enforced by a network of discriminatory laws and military orders.
He said settlers had easy access to planning committees whereas Palestinians were not allowed to serve on the same committees, and it had become virtually impossible for Palestinians to obtain permits to build homes.
"Israeli policies are so harsh in their discrimination against Palestinians that, in a number of cases, Palestinians have been forced to leave because they have no access to water, they have no access to electricity."
The report called for the US to "suspend financing to Israel in an amount equivalent to the costs of Israel's spending in support of settlements, which a 2003 study estimated at $US1.4 billion".
Palestinian Authority President Mahmoud Abbas, speaking yesterday to a delegation of about 100 Israeli politicians and activists, said Mr Netanyahu had chosen settlements over peace.
Direct talks between Israel and the Palestinians, the first for nearly two years, began in Washington on September 2, but stalled when a 10-month Israeli settlement freeze expired on September 26.
"The peace process is in a deep coma," Palestinian negotiator Nabil Shaath said at the weekend. "There's no more credibility to this negotiation process. This is an exercise in futility."
