JERUSALEM (Reuters) - Israel approved on Tuesday the construction of 1,100 settlement homes on annexed land in the West Bank, complicating global efforts to renew peace talks and defuse a crisis over a Palestinian statehood bid at the United Nations.
Israel's decision was met by a chorus of Western criticism including a call from Britain to "revoke" it, while its close ally, the United States said it was "deeply disappointed" with what it saw as a "counter-productive" step.
Palestinian President Mahmoud Abbas applied at the U.N. on Friday for full Palestinian membership, a move opposed by Israel and the United States, which urged him to resume peace talks.
Abbas has made a cessation of Israeli settlement building a condition for returning to negotiations which collapsed a year ago after Israeli Prime Minister Benjamin Netanyahu refused to extend a 10-month partial moratorium on construction.
The so-called Quartet of international mediators -- the United States, the European Union, Russia and the U.N. -- has called for talks to begin within a month and urged both sides not to take unilateral actions that could block peacemaking.
Saeb Erekat, the chief Palestinian negotiator, said the new housing units represented "1,100 'noes' to the Quartet statement" urging a resumption of frozen peace talks.
"Israel is challenging the will of the international community with the continued settlement policy," Nabil Abu Rdainah, an Abbas spokesman, said.
Secretary of State Hillary Clinton said the settlement plan was counter-productive to reviving peace talks.
Richard Miron, spokesman for U.N. Middle East envoy Robert Serry, called Israel's decision "very concerning." He said settlement activity "undermines the prospect of resuming negotiations and reaching a two-state solution to the conflict."
The new homes are to be built in Gilo, an urban settlement that Israel erected on land it captured in the West Bank in a 1967 war and annexed unilaterally as part of its declared capital, Jerusalem.
Palestinians want to create a state in the occupied West Bank and the Gaza Strip, with East Jerusalem as its capital, and say settlements could deny them a viable country. Israel cites historical and Biblical links to the West Bank, which it calls Judea and Samaria.
Israel's Interior Ministry said a district planning committee approved the Gilo project and public objections to the proposal could be lodged within a 60-day review period, after which construction could begin.
In New York on Monday, a divided U.N. Security Council met behind closed doors for its first discussion of last week's Palestinian application for full U.N. membership as a state.
The move seems certain to fail due to Israeli and U.S. opposition, despite substantial support by other governments.
Abu Rdainah said it was up to the Security Council to put a stop to Israel's settlement policy "which is destroying the two-state solution and putting more obstacles in front of any effort to bring about a resumption of negotiations."
In London, Britain's Foreign Secretary William Hague said settlement expansion was illegal and "corrodes trust and undermines the basic principle of land for peace. We call on the Government of Israel to revoke this decision."
U.S. State Department spokeswoman Victoria Nuland said "we are deeply disappointed" and that Washington has "long urged both parties to avoid actions that could undermine trust, including in Jerusalem."
Nuland said that efforts to renew peace talks would continue nonetheless. The U.S.-brokered talks ran aground a year ago over settlement building.
Speaking on Israeli Army Radio before approval of the Gilo plan was announced, the U.S. ambassador to Israel, Dan Shapiro, said Washington opposed Abbas's demand for settlement building to stop before peace talks can be held again.
"We've never set that, in this administration or any other, as a precondition for talks," he said. But Shapiro noted the U.S. has long opposed Israeli settlement in the West Bank.
Netanyahu held consultations on Tuesday with a forum of senior cabinet ministers about Quartet efforts to try and renew peace talks, Israeli media reports said.
Beforehand the Israeli leader indicated he was not about to offer a new settlement moratorium to try to coax Abbas back to the negotiating table.
"We already gave at the office," Netanyahu said in an interview in The Jerusalem Post, a phrase meaning that he believed he had done enough last year when he temporarily halted construction in West Bank settlements.
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