Israel and the U.S. have overcome worse spats than the current brouhaha over the announcement of new settlements in Jerusalem just as Veep Biden arrived in country to attempt a reboot of the peace process. One way or another, things will get patched up.
The question, however, becomes more serious when a closer look is taken at the internal politics that seemingly led to the embarrassing faux pas. Israeli Prime Minister Netanyahu is caught between strident right wing expansionists, and a desire to heal the strained relations with the U.S. that have hardened since Obama's inauguration. The Prime Minister's ability to operate unsabotaged by his own people is now an issue, and that, of course, has implications for his tenure in office.
With the Arab League summit in Tripoli looming, Netanyahu must surely be aware that America will expect movement on Israel's part in return for Biden, in the words of one Haaretz correspondent, "...wiping the spit off his face by pretending it was rain." Europe, too, has withheld upgrading various agreements with Israel until it becomes clear that peace talks will actually take place.
If there was ever a doubt that the first thing the Palestinian Authority would want on the table was borders, there is none now. Israel will be unable to credibly demand that the U.S. back them on security being the first order of business, and Netanyahu has only himself to thank for that.