The Palestinians on Wednesday reacted furiously after a controversial Israeli settlement plan passed a first hurdle, warning that the project would end all hopes for peace.
Israel's plan for construction in a strip of West Bank land outside Jerusalem called E1 has sparked a major diplomatic backlash, with experts saying it could wipe out hopes for the establishment of a viable Palestinian state.
As Israeli Prime Minister Benjamin Netanyahu visited Prague ahead of a trip to Berlin the diplomatic pressure intensified with the European Union summoning Israel's ambassador over the plan.
Since Monday, Britain, France, Spain, Australia, Sweden, Denmark, Egypt, Italy, Ireland and Finland have all taken similar steps in an unprecedented expression of concern over the E1 project, which experts say would isolate Arab east Jerusalem and cut the West Bank in two.
"If Israel decides to start building in E1 and approves all the settlements in it, we consider it to be an Israeli decision to end the peace process and the two-state solution, which ends any chance of talking about peace in the future," Palestinian negotiator Saeb Erakat told AFP.
His remarks came shortly after Israel's two main radio stations said a defence ministry planning committee had given its green light for the E1 plan to be deposited for public approval, pushing it forward in the planning process.
In Rome the secretary general of the foreign ministry, Michele Valensine, told ambassador Naor Gilon the settlement plan and Israel's decision to withhold transfering millions of dollars in tax duties it levies from the Palestinians have "negative consequences for the peace process".
Observers say Israeli plans to build in E1 and connect the Maaleh Adumim settlement with east Jerusalem would effectively prevent the future establishment of a contiguous Palestinian state, dooming the two-state solution.
Palestinian president Mahmud Abbas said the plan was "a red line that cannot be tolerated" and warned he would take all the legal means available to prevent such a "dangerous" decision.
"We went to all international parties to prevent this settlement decision, and if it goes ahead we will resort to all legitimate and legal methods," he said.
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News of Israel's intention to push ahead with the E1 plan emerged on Friday, a day after the Palestinians won UN non-member state observer status, in what was a major diplomatic blow to the Jewish state as it tried to block the move.
With their newly-acquired UN status, the Palestinians now have access to the International Criminal Court in The Hague, sparking fears they could accuse Israel of crimes under the Geneva Convention over its settlement building.
But Netanyahu, who is in the middle of an election campaign, has held firm on the project.
"The root of the conflict is not the settlements; it is the very existence of the state of Israel and the desire to wipe it off the face of the earth," he said Tuesday.
The settlement crisis looked set to play centre stage at Netanyahu's talks in Berlin, which has urged him to withdraw the E1 plans.
"Israel is undermining faith in its willingness to negotiate, and the geographic space for a future Palestinian state -- which must be the basis for a two-state solution -- is disappearing," the German government said.
Tensions between the two allies had flared last week over the UN vote with Berlin abstaining despite Israeli hopes it would vote against the move.
The E1 settlement plan has been on hold since 2005 following heavy US pressure.
Public radio said a defence committee had backed plans for 3,200 homes in E1 and in annexed east Jerusalem, which would now be made available for public objections for 60 days.
An Israeli official told AFP the plan would have to pass another few stages before construction could begin in a process which could take up to a few years.
"Final approval for the plan will have to come from the political level. There won't be any bulldozers going in any time soon. It will take at least several months, if not years," he told AFP.