German Chancellor Angela Merkel told Prime Minister Binyamin Netanyahu on Friday that plans for new housing units in east Jerusalem raised doubts that his government is interested in starting serious negotiations with the Palestinian leadership.

Her spokesman said it was up to Netanyahu to dispel German doubts as to Israel's willingness to engage the Palestinians.

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She reiterated to Netanyahu in the language of a Quartet of Middle East mediators statement which called on both sides to refrain from making "provocative actions."   

Leaders across Europe have been highly critical of Israel's decision to continue development in east Jerusalem.

EU Foreign Affairs chief Catherine Ashton condemned the Gilo plan, calling the program "provocative" and urging Israel to "reverse" its decision to build 1,100 new homes over the Green Line.

Netanyahu rejected European and American complaints over the construction in Gilo, saying "Gilo is not a settlement nor an outpost."

"It is a neighborhood in the very heart of Jerusalem, about five minutes from the center of town."

In every peace plan on the table in the past 18 years, Gilo "stays part of Jerusalem and therefore this planning decision in no way contradicts" the current Israel government's desire for peace based on two states for the two peoples, he added.

Palestinian Authority spokesman Nabil Abu Radina told Ma'an News Agency that the housing plans for the east Jerusalem neighborhood was a unilateral effort on the part of the Israeli government to undermine Palestinian efforts to create a state with east Jerusalem as its capital.

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