JERUSALEM (Reuters) - Israel has given preliminary approval for the construction of more than 800 new homes in Jewish settlements on occupied West Bank land where Palestinians seek statehood, an Israeli official said on Thursday.
The move could complicate U.S.-sponsored Israeli-Palestinian peace negotiations, which resumed last month after an almost three-year freeze over the settlement dispute and whose second round is expected to take place next week.
Guy Inbar, spokesman for Israel's military-run Civil Administration in the West Bank, said initial plans to build 800 new settler homes were approved on Wednesday, though actual construction would require a green light from the government.
"This is a lengthy process," said Inbar, who did not immediately provide further details on the plans.
Peace Now, an Israeli anti-settlement watchdog, put the number of new homes discussed by the Civil Administration on Wednesday at 1,096 and said they were earmarked for 11 settlements - some of them located deep within the West Bank.
Israel insists it would annex major West Bank settlement blocs, which are mainly situated close to the Israeli border, under any peace accord with the Palestinians. Most world powers regard all the settlements as illegal and Palestinians say the enclaves could deny them a viable and contiguous state.
Palestinian officials did not immediately comment on the new settlement initiative, which surfaced as Muslims celebrated the festival of Eid al-Fitr.
Settlement expansion has put Israel's right-leaning government at loggerheads with the European Union, which issued guidelines last month banning EU financial assistance to Israeli organisations in occupied territory.
In a sign of concern over the restrictions, Prime Minister Benjamin Netanyahu convened senior cabinet ministers on Thursday to discuss the EU edict.
An Israeli official said it was generally understood in the meeting that Israel would not sign deals with the EU based on the new directives, and that the ministers decided to seek more clarification from the 28-nation bloc on their implications.
Settler leaders say the aid they receive from Europe is minimal. But many in Israel worry about possible knock-on effects the EU steps may have on individuals or companies based in Israel that might be involved in business in the settlements.
Some 500,000 Israeli settlers live in the West Bank and East Jerusalem, areas captured in the 1967 Middle East war, amid 2.5 million Palestinians. Israel withdrew in 2005 from the Gaza Strip, which is now governed by Hamas Islamists opposed to permanent co-existence with the Jewish state.
On Sunday, the rightist Israeli government put 91 settlements on a national priority funding list, adding six to a roster of dozens of enclaves already eligible for supplemental state cash.
Last month, while U.S. Secretary of State John Kerry was on a peace-brokering visit to the region, the Civil Administration granted initial approval for construction of 732 new homes in Modiin Ilit, a settlement midway between Jerusalem and Tel Aviv.
(Writing by Dan Williams, Editing by Jeffrey Heller and Mark Heinrich)