European Union foreign policy chief Catherine Ashton on Friday said she "deeply regrets" Israel's decision to build 797 housing units in Gilo, which is located beyond the 1967 Green Line in south Jerusalem.

"The High Representative deeply regrets the decision by the Israeli Ministry of Interior to approve the expansion of Gilo settlement by 797 new housing units," an EU statement said.

The Interior Ministry approved a plan on Thursday to expand the settlement neighborhood of Gilo by 797 units. The district committee's approval of Mordot Gilo West Plan will form part of a wider expansion across the Southern and Western Slopes of Gilo.

However, Foreign Minister Avigdor Liberman on Saturday rejected Europe's condemnation.

Liberman stated: "These automatic condemnations are indicative of a lack of a basic understanding of the reality in the region," Israel Radio reported.

Likewise, Jerusalem mayor Nir Barkat on Saturday night slammed the EU's condemnation, saying "Gilo is an unseparable part of Jerusalem and we are not going to apologize for that."

"We will continue to build tens of thousands of apartments across the entire city for all sectors.The only way to lower the price of apartments is to continue building without stopping as we are now in order to allow young people to live in Jerusalem and build themselves a future," he asserted.

Underlining the perceived detrimental effects of expansion, however, Ashton stated: "Settlements are illegal under international law and threaten to make a two-state solution impossible."

She added that Jerusalem’s continued expansion of Jewish settlements like Gilo and Har Homa “continue the process of separating East Jerusalem from the rest of the occupied Palestinian territory.”

Ashton reiterated that talks "continue to represent the best way forward in resolving the Israeli-Palestinian conflict," and called on both parties to immediately return to the negotiating table.

Britain's Foreign Office Minister Alistair Burt also spoke out on Friday against plans to approve some 800 housing units in Gilo, labeling the move "deeply worrying."

In a statement, the foreign office minister said the UK had been clear that settlements were illegal and undermined the two-state solution.

"It is deeply worrying that despite repeatedly raising our concerns, Israel continues to press ahead with plans to expand them. I therefore strongly condemn yesterday’s news," Burt said.

"This move is contrary to Israel’s stated commitments to both the two-state solution and to upholding international law. We urge Israel to reverse this decision and take no further steps to expand settlements."

The Gilo plans came to light a day after Israel Radio reported that Prime Minister Binyamin Netanyahu plans to adopt the Levy Report, which proposes the government legalize unauthorized settler outposts in the West Bank.

The report’s stance runs counter to many opinions in the international legal community, including the International Court of Justice at the Hague, which holds that the West Bank is occupied territory.

Gilo is one of the five ring neighborhoods in Jerusalem that were developed immediately after the Six Day War.

Melanie Lidman contributed to this report.

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