The European Union joined the United States on Monday in expressing concern about new Israeli settlement activity and urged Israel to stick to its commitments in Middle East peace efforts.

"I am very concerned," EU External Relations Commissioner Benita Ferrero-Waldner told reporters when asked about Israel's plan to build 300 homes and other units on land captured in the 1967 Middle East war.

In a rare criticism of Israel, Secretary of State Condoleezza Rice warned on Friday that the plan threatened a new U.S.-backed effort to reach peace between Israelis and Palestinians, launched last month at a conference in Annapolis.

"We want to have a successful peace process," Ferrero-Waldner said after meeting Palestinian Prime Minister Salam Fayyad in Brussels. "The political process will have to be underpinned with progress on the ground."

She said Israel should ease restrictions on access and movement for Palestinians and added: "May I ... call on the Israeli government indeed to abide by all of its commitments being made before and at Annapolis and also to avoid any action that might put the process of building confidence on both sides into question."

Ferrero-Waldner said the European Union joined the United States and the United Nations in seeking an explanation for the move to issue building permits for the construction of the houses in Har Homa in the Jerusalem area.

"I look forward to hearing the reactions of the Israeli authorities," she said.

Under obligations contained in the 2003 "roadmap" framework for Middle East peace, Israel must cease settlement activity on occupied land.

But Israel has said it does not consider the site, known as Abu Ghneim by Palestinians, as part of the West Bank territory the Palestinians want for a state.

Post-Annapolis peace talks are due to begin on Wednesday.

Fayyad said continued settlement activity was inconsistent with commitments made in Annapolis and said lifting of movement restrictions and an ending to the blockade of the Gaza Strip were essential for economic progress.

He praised the European Union's "steadfast" support for the Palestinians and said the Palestinian Authority would seek a total $5.6 billion assistance at a donors' conference next week in Paris to finance an economic development plan for 2008-10.

Ferrero-Waldner said the European Union, the largest aid donor to the Palestinians, would maintain a high level of commitment. She declined to provide a figure.