JERUSALEM, March 18 (JTA) — The Israeli-Palestinian peace process was teetering on the brink of its gravest crisis yet as Israeli bulldozers began work this week at Har Homa. For Prime Minister Benjamin Netanyahu, the decision to begin work on a new Jewish neighborhood in southeastern Jerusalem was a test of the credibility of his government. The Israeli move came Tuesday amid mounting Arab anger and worldwide opposition to the plan to build 6,500 housing units on the rocky hill. Diplomats this week were toiling to forestall any outbreak of violence and to put the Israeli-Palestinian peace process back on course. As he has done repeatedly in recent days, the premier defended his Har Homa decision, after the Cabinet voted unanimously last Friday to give the project the go-ahead. “There is never a good time to build in Jerusalem, because there is always opposition,” Netanyahu told reporters accompanying him on a visit to the Negev, soon after the work began at Har Homa. “When they say, `Wait for better timing,’ they mean, `Don’t build, not ever.’ We intended to build, we promised to build and we are building.” In Washington, U.S. Secretary of State Madeleine Albright reiterated President Clinton’s recent statements indicating that he would have preferred if Israel did not proceed with the Har Homa project. “I think that the Israelis understand the difficulties that we see with their going forward,” she told reporters. “We would very much want to see a return” to negotiations, which she described as the “only time that there has been progress in the Middle East.” Meanwhile, both Israelis and Palestinians prepared for a potentially explosive confrontation. When construction began Tuesday, Palestinian protesters engaged in shoving matches with Israeli soldiers at the site, but there were no serious outbreaks of violence. In the West Bank town of Bethlehem, Palestinian teen-agers burned tires, blocked roads with trash containers and taunted Israeli soldiers. Earlier in the day, the premier convened key ministers and security chiefs to assess the possibility of a violent Palestinian reaction. Officials warned after the meeting that Israel would hold Palestinian Authority leader Yasser Arafat “personally responsible” for any violence or terrorism. The Palestinians, for their part, angrily denied Israeli media reports that Arafat had given the nod to Palestinian opposition groups to renew violent attacks against Israel. Earlier, it was reported that Netanyahu had been told that Arafat had given the go-ahead for the use of violence in response to building at Har Homa, and Israel subsequently suspended efforts to coordinate a meeting between the two. Netanyahu later said that he was always ready to meet with Arafat. Underscoring his avowed commitment to peace, Arafat met Tuesday with Yossi Sarid, leader of the dovish Meretz Party, and with a delegation from the left-wing organization “A Whole Generation Demands Peace,” which is led by Yuval Rabin, the son of slain Prime Minister Yitzhak Rabin. Sarid said after the meeting that Arafat was disturbed by the decision to proceed with the construction, but that he was calling for restraint. In a statement broadcast Tuesday on Voice of Palestine radio, Arafat urged Palestinians to refrain from violence. At the same time, Palestinians leaders sharply condemned the move. Palestinian Authority official Saeb Erekat accused Netanyahu of pushing the sides toward violence and of destroying the peace process. The Palestinians oppose the building, saying that it alters the status quo in Jerusalem, whose future is to be determined in the final-status talks, which were scheduled to begin this week. Israeli security forces went on heightened alert in preparation for the start of construction. Israeli soldiers ringed the building site to prevent any confrontations with Palestinians from nearby villages or with those gathered in protest tents near Har Homa. Police reinforcements were stationed throughout eastern Jerusalem, and the Israel Defense Force went on heightened alert in the territories. The Hebron and Bethlehem self-rule areas were declared closed military zones. Joint Israeli-Palestinian patrols were suspended, and Joseph’s Tomb in Nablus, the sight of bloody clashes between Israeli forces and Palestinians in September, was closed.