JERUSALEM, March 2 (Reuters) - Prime Minister Benjamin Netanyahu, citing concern over Israel's international image, persuaded Jerusalem's mayor on Tuesday to put on hold any demolition of Palestinian homes in a municipal tourism project.

Palestinian officials said the project was another attempt by Israel to cement its claim to all of Jerusalem.
Israel captured East Jerusalem in a 1967 war and considers the entire city its indivisible and eternal capital, a claim that has not won international recognition.

Mayor Nir Barkat wanted to demolish dozens of Palestinian homes built without permits in the East Jerusalem neighborhood of Silwan, reshaping parts of it into parkland and hotel and business areas to boost tourism to the city, media reports said.

In return, the reports said, the residents would receive permission to build elsewhere in Silwan, which is adjacent to Jerusalem's walled Old City.

A statement issued by the prime minister's office said Netanyahu told Barkat he was concerned 'parties interested in sowing discord' would present to the world a 'distorted picture' of the 'King's Garden' plan.

A city spokesman said Netanyahu had asked Barkat to allocate more time to 'come to an understanding' with the Palestinian inhabitants.

'Of course I accepted the prime minister's request and I decided to delay the discussion of the local commission in planning (King's Garden), and continue the discussion with the residents,' Barkat told a news conference.
Barkat and Netanyahu spoke hours before the mayor was set to unveil details of the project at the conference.

The plan has stoked Palestinian anger and any demolitions would be certain to raise international concern.
Palestinians want East Jerusalem to be the capital of a state they hope to establish in the West Bank and Gaza Strip.

Israel's main ally, the United States, and other Western countries have called on Israel to cease the demolition of Palestinian homes built without municipal permits in East Jerusalem.

Palestinians say building permission is impossible to obtain.

LIMITED FREEZE

Citing biblical and historical links to Jerusalem, Netanyahu has excluded the city from a limited freeze on Jewish settlement construction he ordered in November after US pressure to help revive stalled peace talks.

Tensions have risen in Jerusalem over the past week since Netanyahu announced he intended to include two holy sites, revered by Jews and Muslims, in the West Bank in a separate Jewish heritage plan.

Palestinians say they are concerned the heritage project could impinge on Muslim freedom of worship. Netanyahu has said those fears are misplaced and the project was aimed only at making renovations at holy places in need of maintenance.

On Monday, an Israeli security guard was wounded by gunfire in Silwan. A day earlier, Israeli police scuffled with dozens of rock-throwing Palestinians outside al-Aqsa mosque in the Old City.