AFP - The United States delivered Tuesday an unusually strong rebuke of Israel, voicing dismay at the approval of new Jewish housing in annexed east Jerusalem as peace efforts hit a new low.
   
The biting response from President Barack Obama's administration came after the Israeli interior ministry gave the green light for the construction of 900 new units in Gilo, one of a dozen Jewish settlements in east Jerusalem.
   
"We are dismayed at the Jerusalem planning committee's decision to move forward on the approval process for the expansion of Gilo in Jerusalem," said White House spokesman Robert Gibbs.
   
"At a time when we are working to relaunch negotiations, these actions make it more difficult for our efforts to succeed," said Gibbs, effectively accusing Israel of undermining the floundering US-led peace process.
   
Israel's settlement move flew in the face of Palestinian calls, backed by Washington, for a complete freeze on new building before any new round of talks.
   
With the Palestinians so frustrated at the failure of peace efforts that they have launched a unilateral bid to seek statehood from the United Nations, the two sides are as far apart as ever.
   
"Neither party should engage in efforts or take actions that could unilaterally pre-empt, or appear to pre-empt, negotiations," Gibbs warned on Tuesday in comments echoed by the US State Department.
   
Reports in the Israeli media said hawkish Prime Minister Benjamin Netanyahu had rejected US pleas to halt the construction in Gilo but did not specifically refer to the latest expansion move.
   
Netanyahu was widely condemned by the international community for allowing new housing units to be erected in the disputed area.
   
"The secretary-general deplores the government of Israel's decision today to expand Gilo settlement, built on Palestinian territory occupied by Israel in the 1967 war," said a spokesman for UN chief Ban Ki-moon.
   
Britain echoed the criticism. The Foreign Office said Foreign Secretary David Miliband "has been very clear that a credible deal involves Jerusalem as a shared capital.
   
"Expanding settlements on occupied land in east Jerusalem makes that deal much harder. So this decision is wrong and we oppose it," a spokeswoman said.
   
Israel captured east Jerusalem with the rest of the West Bank in the Six Day War of 1967. It later annexed it in a move never recognized by the international community and insists on retaining the whole of the Holy City as its "eternal, indivisible" capital.
   
The Palestinians are determined to make the city's eastern sector the capital of their promised state and deplore the fact that Israel has so far only offered a limited reduction in new building there.
   
Palestinian president Mahmud Abbas said the impasse gave him no choice but to unilaterally pursue international recognition of a Palestinian state, even as Europe and the United States discouraged the move.
   
"We feel we are in a very difficult situation," he said in Cairo after talks with Egyptian counterpart Hosni Mubarak. "What is the solution for us? To remain suspended like this, not in peace? That is why I took this step."
   
The European Union, the Palestinians' biggest donor, joined the United States Tuesday in urging reconsideration of the recognition move and instead called for a return to talks.
   
"I would hope that we would be in a position to recognize a Palestinian state but there has to be one first, so I think it is somewhat premature," said Swedish Foreign Minister Carl Bildt, whose country holds the EU presidency.
   
The Islamist Hamas movement, which controls the Gaza Strip and is a bitter rival of Abbas's Fatah grouping, has also poured cold water on any bid for international recognition.