Despite a resumption of Israeli-Palestinian negotiations on Israeli troop withdrawal from the town of Hebron, President Clinton escalated White House rhetoric with Israel on Monday, saying Prime Minister Benjamin Netanyahu is undercutting the peace process by subsidizing Jewish settlements in the West Bank.

The president said at a news conference in Washington that Netanyahu’s decision, announced last week, to provide tax breaks and other subsidies to encourage Jews to move into the disputed West Bank is an obstacle to peace because it is designed to pre-empt negotiations.

The comments came as Israeli and Palestinian negotiators went back to the bargaining table in Jerusalem, easing a crisis that began last Wednesday when Arab gunmen ambushed an Israeli family, prompting Netanyahu to step up government efforts to expand Jewish settlements.

All involved in the elusive search for a Hebron agreement cautioned against reading too much into the resumption of talks or a telephone conversation between Netanyahu and Palestinian leader Yasser Arafat that prompted it.

Clinton hailed the resumption of the talks over troop redeployment in Hebron, the only predominately Palestinian city still under occupation. But he also indicated a growing impatience with the seeming inability of the Israelis and Palestinians to finish up an agreement.

“I’m pleased that the prime minister and Chairman Arafat talked,” Clinton said. “But sooner or later they have to do something. And they’ve had an agreement within grasp, with very little difference, on Hebron for some time now. The time has come to make that agreement.”

Asked if settlements are an obstacle to peace, Clinton said: “Absolutely.”

It was the first time that Clinton had endorsed the “obstacle to peace” rhetoric that had been a feature of the Middle East diplomacy of former Secretary of State James A. Baker.