Updated

Prime Minister Ehud Olmert told political allies Sunday it was a "disgrace" Israel hadn't honored its promise to dismantle dozens of West Bank settlement outposts, a meeting participant said — using that exceptionally harsh language just days after U.S. President George W. Bush declared the unauthorized encampments "ought to go."

Later, he told his Cabinet that Bush assured him militants would have to be subdued in Hamas-run Gaza before any Israeli-Palestinian peace deal could be implemented.

"There is no separation between the West Bank and Gaza as far as the Palestinians commitments," Olmert said at the beginning of his weekly Cabinet meeting. "The president said we are talking about two states for two people, not three states for two people, and this emphasis is important."

Israel recently relaunched peace talks with the moderate government of Palestinian President Mahmoud Abbas on the basis of the "road map" peace plan of 2003. Phase one of the plan requires Israel to halt settlement construction and take down unauthorized settlement outposts built after March 2001. The Palestinians are obliged to crack down on militants.

Just weeks after taking office in January 2006, Olmert sent police to tear down nine unauthorized homes in the Amona outpost. But violent clashes ensued there between police and settlers, and in the two years since, he has taken no serious action against the outposts.

In a meeting with political allies on Sunday, Olmert used the word "disgrace" to describe the fact that the outposts remain standing, a person who attended the meeting said. The meeting participant, who spoke on condition of anonymity because the meeting was closed, said the use of such a strong word was intended to show Olmert's determination to implement this road map obligation.

Palestinians urged Olmert to follow through on his declarations.

"I really hope that Mr. Olmert will honor his commitment as far as settlement freeze and dismantling of settlement outposts and other obligations because what we need now is deeds and not words," Palestinian negotiator Saeb Erekat said.

Right-wing members of Olmert's coalition and settlers oppose any action against the outposts, making the issue extremely sensitive at a time when the prime minister is trying to hold together his coalition and make peace with the Palestinians.

Settlers started putting up outposts across the West Bank after Israel reached its initial peace accords with the Palestinians in the early 1990s, in an effort to break up territory the Palestinians want for a future state. More than 100 were built without official authorization, but with the tacit or active cooperation of Israeli authorities.

The government maintains there are about two dozen outposts built after March 2001. Peace Now, an anti-settlement group, puts the number around 50.

During his visit to the region last week, Bush ducked the big controversies over Israel's refusal to halt all construction in the West Bank and east Jerusalem, areas the Palestinians claim for a future state.

He did, however, wade into the more marginal issue of unauthorized outposts.

In reply to a question at a news conference with Olmert in Jerusalem last week, Bush called for action against the encampments.

"Look, I mean, we've been talking about it for four years," he said. "The agreement was, `Get rid of outposts, illegal outposts,' and they ought to go."'

Several thousand Israelis live in outposts, in addition to about 270,000 who live in more than 120 authorized settlements. An additional 180,000 Israelis live in Jewish neighborhoods in east Jerusalem.

The status of Jerusalem and settlements are key issues between the two sides, who have pledged to try to reach a peace deal by the end of Bush's tenure a year from now. So, too, are the final borders of a Palestinian state and a solution for Palestinian refugees who claim the right to return to property in Israel they lost in the war following the Jewish state's creation in 1948.

Complicating peacemaking is the fact that Abbas has no influence over Gaza, whose Islamic Hamas rulers don't recognize Israel's right to exist and let extremists bombard Israeli border communities with rockets and mortars.

Yuval Diskin, head of Israel's Shin Bet internal security agency, told Cabinet ministers on Sunday that Israel has killed almost 1,000 Gaza militants in the past two years. Diskin has said in the past that some 20,000 gunmen operate in the territory.

At Sunday's Cabinet meeting, Olmert said Bush assured him Gaza would have to be part of any future peace deal with the Palestinians.

"He repeated the absolute commitment of the U.S. that no agreement between us and the Palestinians can be implemented on the ground before the full implementation of the road map, both in Gaza and in the West Bank," Olmert said.

During his first-ever visit to the West Bank last week, Bush acknowledged that "Gaza is a tough situation. I don't know whether you can solve it in a year or not."