EU 'hopes' new settler homes will not stop peace talks

His statement comes after the Israeli minister for housing, Uri Ariel, earlier the same morning invited private firms to tender for the construction of 1,200 new Jewish homes in occupied East Jerusalem and the West Bank.

He told press at a cornerstone-laying ceremony at one settlement that "this is only the beginning" and that "more than 10,000" other settler homes are waiting to be built.

The news came three days before Palestinian and Israeli negotiators are to resume peace talks in Jerusalem on Wednesday.

Israel also on Sunday named 26 Palestinian prisoners who are to be released as a gesture of good will.

But the last peace talks fell apart in 2010 over the issue of Israeli settlement building.

"Israel is deliberately sending a message to the US, to the rest of the world, that regardless of any attempt at launching negotiations: 'We are going to press ahead with stealing more land'," Hanan Ashrawi, a senior official in the Palestine Liberation Organisation, told the BBC.

Some members of Israel's ruling coalition also criticised Uriel.

Finance minister Yair Lapid called his decision a "big mistake." Environment minister Amir Peretz described it as an "unnecessary provocation."

For his part, Yoel Mester, the Israeli foreign ministry's spokesman in Brussels, said it is being "blown out of proportion" and used for "spin" by the Palestinian side.

"This is a Palestinian attempt to improve their negotiating position ahead of Wednesday's talks," he told EUobserver.

In a related development, the EU recently published new guidelines on funding for Israel.

They say no EU grants will be paid to Israeli entities which are established on Palestinian land and oblige Israeli authorities to sign agreements recognising the limits of Israeli territory.

Israeli President Shimon Peres at a meeting with German foreign minister Guido Westerwelle in Jerusalem on Sunday urged Brussels to "freeze" the initiative.

Tzipi Livni, Israel's chief negotiator in the peace talks, told press: “The future borders between Israel and Palestine will be decided through negotiations and not by EU guidelines."

Westerwelle said little on the subject.

Brussels in a previous statement on 19 July said it hopes Israel will not boycott EU research programmes, such as the Horizon 2020 scheme, as a result of the development.

It also hinted it is willing to cut the territorial limits clause from its text.

"She [EU foreign affairs chief Catherine Ashton] offered to continue technical discussions on the implementation of these guidelines," the statement said.