The European Union said Wednesday it was dismayed by Israel's recent decision to expand the southeast Jerusalem neighborhood of Gilo.
In a statement, the EU Presidency stressed that settlement activities, house demolitions and evictions in east Jerusalem were illegal under international law.
"Such activities also prejudge the outcome of final status negotiations and threaten the viability of a two-state solution," it said.
The presidency recalled that the European Union had never recognized the annexation of east Jerusalem in 1967 nor the subsequent 1980 basic law.
"The actions taken by the Israeli government contravene repeated calls by the international community, including the Quartet, and run counter to the creation of an atmosphere conducive to achieving a viable and credible solution to the conflict between Israelis and Palestinians," continued the statement. "If there is to be genuine peace, a way must be found to resolve the status of Jerusalem as the future capital of two states."