Western powers angered as Israel agrees settler homes
Western powers have expressed dismay at Israeli plans to build 1,100 more homes on the edge of Jerusalem.
The US Secretary of State Hillary Clinton called the move "counter-productive" to peace talks while the EU said the plan should be "reversed".
The announcement comes days after Palestinian leader Mahmoud Abbas called for full UN membership for a Palestinian state.
The new houses are to be constructed at Gilo, in East Jerusalem.
Almost 500,000 Jews live in settlements on occupied territory. The settlements are illegal under international law, although Israel disputes this.
Mrs Clinton said Israel's move would damage attempts to resume direct negotiations with the Palestinian Authority.
Gilo is built on land captured by Israel in 1967.
"We have long urged both sides to avoid any kind of action which could undermine trust, including, and perhaps most particularly, in Jerusalem, any action that could be viewed as provocative by either side," she said.
The European Union's Foreign Policy Chief Catherine Ashton told the EU parliament that she heard "with deep regret" that Israeli settlement plans were continuing.
"This plan should be reversed. Settlement activity threatens the viability of an agreed two-state solution and runs contrary to the Israeli-stated commitment to resume negotiations."
She said she would raise the issue with Israeli Prime Minister Benjamin Netanyahu when she next met him.
"He should stop announcing them and, more importantly, stop building them," she said, adding that it was wrong to get people to live in a place from which they may have to move from after any negotiated settlement is achieved.
British Foreign Secretary William Hague too urged Israel to revoke its decision.
"Settlement expansion is illegal under international law, corrodes trust and undermines the basic principle of land for peace," he said in a statement.
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