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By Justyna Pawlak
BRUSSELS, Dec 10 (Reuters) - The European Union sharply criticised Israel on Monday over its plans to build settlements in a highly sensitive part of the West Bank, and rebuked Hamas Islamists for questioning Israel's right to exist.
"The EU is deeply dismayed by and strongly opposes Israeli plans to expand settlements," foreign ministers of the 27 EU states said in a statement after meeting in Brussels.
"The EU will closely monitor the situation and its broader implications, and act accordingly."
Sweden's foreign minister Carl Bildt said European governments were increasingly frustrated by the settlement policy.
"What the Israelis did ... has really shifted things inside the European Union to the extent that I don't think they really appreciate," Bildt said before the meeting.
France had wanted to include a warning in Monday's statement that construction in the sensitive parts of the West Bank would damage the relationship between Israel and the EU. The statement did not contain such a comment.
The EU ministers also warned the Palestinians not to take advantage of last month's upgrade in their U.N. status to further undermine confidence between the two sides.
On Saturday, Khaled Meshaal, leader of the Islamist Hamas which rules Gaza, told a mass rally there he would never recognise Israel and pledged to "free the land of Palestine inch by inch".
"The EU finds inflammatory statements by Hamas leaders that deny Israel's right to exist unacceptable," the ministers said.
Israel announced its new settlement plan shortly after the U.N. General Assembly upgraded the Palestinians' status in the world body from "observer entity" to "non-member state".
The upgrade, approved overwhelmingly, fell short of full U.N. membership, which only the Security Council can grant. But it has significant legal implications because it could allow the Palestinians access to the International Criminal Court where they could file complaints against Israel. (Reporting by Justyna Pawlak; Editing by Sebastian Moffett and Andrew Roche)