The Parliament said plans announced Dec. 2 for 3,000 new housing units in the West Bank and East Jerusalem made a two-state solution "impossible." The settlement plans would make plans for a contiguous and sovereign Palestinian state unworkable, Parliament members said.
The settlement announcement followed the passage of a resolution at the U.N. General Assembly that upgraded Palestine's status at the world body to that of a non-member observer state.
A U.N. committee said any move by the Israeli government to expand settlement activity would strike a "mortal blow" to the Middle East peace process.
Both actions followed an outbreak of violence between Israel and Hamas. Israel said it was exercising its right to self-defense against rocket fire from Hamas-controlled territory.
Hamas political leader Khaled Meshaal traveled to Gaza last week, marking the first time he's set foot on Palestinian soil in 45 years.
The European resolution said direct talks between Israeli and Palestinian leaders were the best way forward.
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