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Palestinian leader Yasser Arafat said Saturday that Israel's announcement that it will not limit settlement construction is "a gross violation" of the peace process.

Arafat also vowed that the Palestinians will not surrender "a grain of sand from Holy Jerusalem."

Arafat's statements came a day after Israeli Prime Minister Benjamin Netanyahu said that Israel would not limit settlement construction in the occupied West Bank or Jerusalem, despite U.S. calls for a timeout.

"What Netanyahu said is a gross violation of the signed agreements, the peace process and international resolutions," Arafat told reporters. He spoke after briefing President Hosni Mubarak on his Thursday meeting with U.S. Secretary of State Madeleine Albright in Paris.

"It should be clear that the Palestinian people are attached to their occupied land and (are committed to) liberating it from Israeli occupation," he said, shortly before departing for Gaza.

Last month, Netanyahu also dismissed U.S. calls for a delay, calling the dispute a "non-issue."

If Netanyahu persists, it could lead to "the almost complete collapse of the peace process," Foreign Minister Amr Moussa said.

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