Israel moved ahead with plans to build 3,000 settler homes in one of the most sensitive areas of the West Bank, as the European Union summoned Israel's envoy to add its voice to a storm of international protest.
Israeli Prime Minister Benjamin Netanyahu said on Wednesday the global condemnation, some of it from the Jewish state's closest traditional allies, would not deter it from defending its "vital interests".
Palestinian Authority President Mahmoud Abbas on Wednesday declared the housing project, which could divide the West Bank and make the creation of a contiguous future Palestinian state almost impossible, to be an uncrossable "red line".
An Israeli Defence Ministry official said architects and contractors appeared before a subcommittee of the military-run Civil Administration in the West Bank and registered their plans for construction in the E1 corridor near Jerusalem, a preliminary step before building permits are issued.
Angered by the U.N. General Assembly's de facto recognition of Palestinian statehood on Thursday, Israel announced the next day it would build the new dwellings for settlers, on land near Jerusalem that Palestinians seek for a future state.
The decision by Netanyahu's pro-settler government to build houses on the E1 corridor's barren hills could bisect the West Bank, cut off Palestinians from Jerusalem and further dim their hopes for an independent state on contiguous territory.
"E1 is a red line that cannot be crossed," Palestinian Authority President Mahmoud Abbas said in the West Bank city of Ramallah.
The subcommittee convened hours before Netanyahu was due to visit Germany, where he faces a dressing down from Chancellor Angela Merkel over the settlement project.
The Israeli prime minister, for his part, is still smarting from what he considers Berlin's betrayal after Germany abstained in the U.N. vote upgrading the Palestinians' status to non-member state at the world body.
Netanyahu, stopping in Prague to thank the Czech Republic for voting against, reiterated that he remained committed to a two-state solution with the Palestinians.
Peace should entail "a demilitarized Palestinian state (that) recognizes the one and only Jewish state of Israel", he said, citing two Israeli conditions Palestinians have balked at.
Netanyahu, favored to win a January 22 general election with the backing of right-wing voters, has rejected calls by the United States and Europe to reverse course over settlements, which most countries consider illegal.
"Israel will not sacrifice its vital interests for the sake of obtaining the world's applause," he said in Prague.
Israel's housing minister has said construction work in E1 will not begin for at least a year. Commenting on the subcommittee's session, the defence official said it was a "procedural, preliminary stage".
The European Union summoned Israel's ambassador.
"The Israeli ambassador has been invited by the Executive Secretary General of the EEAS (European External Action Service) to meet to set out the depth of our concerns," a spokeswoman said.
The Executive Secretary General - the senior diplomat in charge of policy for EU foreign affairs chief Catherine Ashton - is Pierre Vimont, former French ambassador to Washington.
Italian Foreign Minister Giulio Terzi summoned the Israeli envoy in Rome for a similar meeting on Wednesday, following Britain, France, Spain, Sweden and Denmark in such a move.
But EU states have been struggling to agree on a common response.
The spokeswoman said the EU reaction would depend on the extent to which they threatened the creation of a viable state of Palestine in the future.
After winning the U.N. status upgrade, the Palestinians can access the International Criminal Court in The Hague, which prosecutes people for genocide, war crimes and other major human rights violations and where it could complain about Israel.
The Palestinians have said they will not rush to sign up to the International Criminal Court, but have warned that seeking action against Israel in the court would remain an option if Israel continued to build illegal settlements.
They sent a letter of protest to U.N. Secretary-General Ban Ki-moon on Monday.
"A clear message must be sent to Israel that all of its illegal policies must be ceased or that it will be held accountable and will have to bear the consequences if its violations and obstruction of peace efforts," Palestinian U.N. observer Riyad Mansour wrote.
UN RESOLUTION "ONE-SIDED"
Analysts said Netanyahu hoped to solidify right-wing support by promoting settlements in the run-up to the parliamentary election, even at the risk of diplomatic isolation.
U.S.-sponsored Israeli-Palestinian talks collapsed in 2010 in a dispute over settlement building, and Abbas pressed ahead with his unilateral move at the United Nations over U.S. and Israeli objections and calls to return to the negotiating table.
"Our conflict with the Palestinians will be resolved only through direct negotiations that address the needs of both Israelis and Palestinians," Netanyahu said in Prague.
"It will not be resolved through one-sided resolutions at the U.N. that ignore Israel's vital needs and undermine the basic foundations of peace."
The West Bank and East Jerusalem, captured by Israel in the 1967 Arab-Israeli war, is home to some 500,000 Israelis and 2.5 million Palestinians.
Writing by Andrew Roche; Editing by Jon Boyle