Israeli plans to build nearly 900 homes in east Jerusalem undermine the credibility of peace talks with the Palestinians, the European Union said Monday. The 27-nation bloc said the decision last month to build new homes was illegal under international law. "This decision serves to undermine the credibility of the ongoing diplomatic process," the EU said in a statement. "Settlement activities prejudge the outcome of final-status negotiations and compromise the viability of a concerted two-state solution," it added. Last week the Interior Ministry gave tentative approval to a Jerusalem municipal plan to build nearly new homes in the southeast Jerusalem neighborhood of Har Homa. The neighborhood, which overlooks Bethlehem, is considered controversial because it was constructed during the last decade on land annexed by Israel after the Six Day War, despite opposition from the international community.