About 20 people live in the bulldozer driver's family home, relatives said [AFP]

"We must use a punishment that would deter. We have to act with a tough hand, to negate social rights, to immediately destroy the homes of every terrorist from Jerusalem," a government official quoted Olmert as saying.

Police have reinforced patrols throughout Israel but a state of emrgency imposed after the attack on Wednesday was lifted on Thursday. The army was taking additional precautions at checkpoints in the West Bank after the attack in the busy Jaffa Road.

Olmert is "very worried" that both Wednesday's attack and the shooting of seminary students earlier in March this year had been perpetrated by Palestinians from Arab East Jerusalem, the official said.

Police have said they believe that Hussam Dwayat, the 30-year-old driver who was shot after the attack, acted alone and was not connected to any armed Palestinian group.

Defence and legal officials met on Thursday to discuss the demolition issue.

In 2005, Israel pledged to the supreme court that it will not demolish the homes of Palestinians involved in attacks on Israelis.

Illegal practice

The pledge came after an Israeli military committee decided that the the demolishing of homes did not act as a detterent against Palestinian fighters.

Legally, however, no formal court order was issued and the committee had itself declared that the practice would be halted.

Several human rights groups had petitioned against the procedure and any renewal of the policy is likely to draw legal challenges.

B'Tselem, an Israeli human rights organisation, on Thursday issued a letter to the Israeli government asking it not to renew the policy of demolishing the homes of those involved in such attacks.

Avi Berg, a spokesperson for the group, said: "The letter was issued in accordance with what we have heard in the media about [Israeli] intention. We stated again that this practice is illegal in accordance with international law.

"We demanded them not to renew this policy", Berg said.

About 20 people live in the bulldozer driver's family home, relatives say.

'Possibility of demolition'

Meanwhile, Israel's vice prime minister has said that he wants Palestinian neighbourhoods excluded from Jerusalem following Wednesday's attack.

Haim Ramon told Army Radio that the Arab neighbourhoods were artificially incorporated into Jerusalem and should be ceded to the West Bank.
 
"They were annexed in 1967 and we call them Jerusalem, even though there is not one Jerusalemite there," he said.

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