JERUSALEM (AP) -- The European Union said Tuesday it has asked Israel not to announce any new West Bank settlement construction following an expected Palestinian prisoner release, warning that it would be held responsible for any resulting failure in Mideast peace talks.
In further pressure on Israel, a European delegation told Israeli officials that there could be dire consequences if the current round of peace talks collapses, including economic sanctions against the settlements, an EU official said.
The warnings were the latest sign of international displeasure over Israeli settlement construction and its effect on the negotiations, which have yielded no tangible results since their launch last summer.
The issue of Jewish settlements is at the core of the current impasse in Mideast peace efforts. For most of the past five years, the Palestinians refused to negotiate with Israel while settlement construction continued. The Palestinians say the settlements are a sign of bad faith. Some 550,000 Israelis now live in the West Bank and east Jerusalem, making it increasingly difficult to partition the land.
The Palestinians seek both areas and the Gaza Strip, lands captured by Israel in 1967, for their state, though they are willing to accept minor land swaps in drawing the final border to accommodate some of the settlements Israel has built on war-won land.
Under a U.S.-brokered formula to restart talks, the Palestinians dropped their demand for a construction freeze while Israel agreed to release 104 of the longest serving Palestinian prisoners it holds. The releases are taking place in four stages, with the third one expected later this month.
The prisoners have been convicted in deadly attacks on Israelis. In order to appease a public uproar over the releases, Israel has announced plans to build hundreds of additional settler homes in recent months. The announcements have prompted international condemnations and Palestinian threats to withdraw from the talks. The U.S.-brokered negotiations aim to reach a peace deal by April.
"If these talks fail because of a new settlement announcement, Israel risks having a finger pointed at it," Eyal Inbar, the EU's acting spokesman in Israel, said Tuesday.
Inbar said that the EU message was delivered to the director of Israel's Foreign Ministry on Monday. Details of the meeting were first reported by the Haaretz daily.
Another EU official said Tuesday that a separate delegation of officials from the EU's five largest countries had threatened to take economic action over the settlements if the peace talks fail.
The official warned of "unprecedented steps," including explicit labeling of settlement products exported to Europe and even a possible ban on such items. The official also said that Europe threatened to halt its aid to the Palestinian Authority, the Palestinian self-rule government in the West Bank.
The official gave no details on when such measures might take effect. He spoke on condition of anonymity because he was discussing a closed diplomatic meeting. Israeli Foreign Ministry spokesman Yigal Palmor declined comment.
The European official said the threat to cut off aid was also delivered Tuesday to Palestinian officials.
A halt in aid would be painful to both sides. For the Palestinians, it would likely bring the collapse of the Palestinian Authority. But for Israel, it could be even more painful by forcing it to assume responsibility for 2.5 million Palestinians living under military occupation in the West Bank.
The threats are part of a mixed approach of tough talk and incentives voiced by Europe. On Monday, EU foreign ministers pledged "unprecedented" political, financial and security support for Israel and the Palestinians if they reach a peace agreement. That would mean increased access to European markets, closer cultural and scientific ties, promotion of business-to-business relations. The EU official Tuesday said the package could include a special "nonmember" state status for the Palestinians, giving them special access to European markets and resources.
The EU representative to the Palestinians, John Gatt-Rutter, on Tuesday met with the Palestinian president and prime minister on Tuesday to discuss the EU offer.
In a statement, he said the EU has urged Israel and the Palestinians "to seize the unique opportunity provided by the peace negotiations. By doing so and by providing a substantial offer of practical support, the EU has indicated its readiness, once more, to accompany both parties toward a just and lasting peace."
Still, Europe has grown increasingly impatient with the stalemate.
Last week, EU auditors recommended that the bloc should stop paying the salaries of Palestinian civil servants in Gaza who haven't worked since Hamas seized the territory from Palestinian President Mahmoud Abbas in 2007, leaving him with only the West Bank. Abbas has continued to pay the idle workers to maintain political support in Gaza.
But Israel's settlement building has particularly rankled Europe, which, like the Palestinians and much of the international community, considers the settlements illegal.
The 28-member EU already bars goods produced in Israeli settlements from receiving customs exemptions given to Israeli goods. Officials in the bloc are also considering measures that would more clearly label settlement goods. The EU has also forced Israel to accept guidelines barring EU funds from supporting Israeli projects in the West Bank, east Jerusalem and other territories captured by Israel in 1967.
Daraghmeh contributed reporting from Ramallah, West Bank.