UN Secretary-General Ban Ki-moon said Thursday it was "critical" that Israel halt all settlement activity. He added that he was considering fining the state $11 million for damage it did to UN facilities during the Gaza war.

Ban says the fine was recommended by a committee elected to investigate damage done by the IDF to UN structures during Operation Cast Lead.

Regarding the settlements he said, "The UN position is well known. It is critical that Israel freeze settlement expansion and dismantle outposts as the Quartet, and more recently US President (Barack) Obama, have asked," he told a press conference in New York.

The secretary-general said the Middle East Quartet had scheduled a meeting in Italy ahead of an anticipated speech by Prime Minister Benjamin Netanyahu, in which he plans to outline government policy.

Ban also stressed that "the rights of both peoples, Palestinians and Israelis, to self-determination, statehood and security are the basis of any policy going forward".

He also mentioned the situation in the Gaza Strip. "We must deal with obvious humanitarian challenges," he said. "The Gaza blockade is devastating the population and achieving little in security and political terms. If the crossings continue to remain closed for most goods, the people of Gaza will slide into even deeper hardship, with the risk of further radicalization."

Ban spoke following a visit by US special envoy to the Middle East, George Mitchell. Mitchell met with Jordan's King Abdullah II, who called on Israel and the Palestinians to take advantage of the momentum created by Obama in order to solve the conflict. He said Israel must halt settlement activity and stop claiming land in east Jerusalem.

Great EU expectations

Earlier in the day visiting EU foreign policy chief Javier Solana urged Netanyahu to commit to the concept of a Palestinian state being created alongside Israel.

"I would like to hear a speech in which there's a commitment of the government to the two-state solution, a commitment of the government on the question of settlements and a commitment to re-initiate relations with the Palestinians," he told journalists.

"I am sure that we will hear something of that nature," said Solana, who met Peres and other Israeli government officials on Thursday.

He cited US President Barack Obama's speech in Cairo a week ago addressed to the Arab and Muslim world, in which he spoke of the urgent need for a Middle East peace settlement.

Solana also cited this month's election result in Lebanon which Western powers took as a promising development since Iranian-backed Hizbullah failed to score a breakthrough.

He looked forward to Friday's election in Iran, where hardline President Mahmoud Ahmadinejad faces a challenge from moderate Mirhossein Mousavi.

This could be a good moment, Solana said, to "see how we can bring back the situation to something that can be moving in the right direction," after a year of no progress in the peace process, and an Israeli military offensive in the Gaza Strip.