construction of some 1,200 settlement homes in a strategically important part of the occupied West Bank have sparked fresh condemnation by major Western powers.

In a joint statement, the UK, France, Germany, Italy and Canada called the decision "unacceptable" and urged Israel to "retract the plans immediately".

All settlements are illegal under international law and, under international pressure, Israel held off for decades on plans to build in E1 to the east of Jerusalem.

Many of its allies and Palestinians argued this development would deal a major blow to hopes of a two-state solution, effectively cutting the West Bank in two and isolating east Jerusalem.

"At a time of grave instability in the West Bank with unprecedented levels of violence by settlers against civilians, and serious restrictions on the Palestinian economy, this decision is even more concerning," the statement from the European allies and Canada published on Thursday said.

"Not only will they [the plans] take us further from peace, but they further undermine Israel's international standing," the statement added.

In a separate statement, the UN secretary general also said the E1 plan posed an "existential threat" to a contiguous Palestinian state - and so did Belgium's foreign minister. (BBC)