Defense Minister Ehud Barak on Tuesday called a freeze in West Bank settlements a 'national necessity,' a day after he approved building permits for nearly 500 new housing units in six separate blocs.

"We extent our hand in peace to all of our neighbors," Barak said during a toast held to mark the upcoming Jewish New Year, adding that he hopes Israel, the Palestinians and the international community "realize that the time has come and we must not miss this opportunity."

Barak said that diplomatic decisions carried out by Israel, particularly with regard to settlement construction, "must be done through careful consideration and thought, not through harsh words and violence."

Foreign Minister Avigdor Lieberman said earlier Tuesday that Israel has not and will not discuss a limit on construction anywhere in Jerusalem.

"We must make it clear it to the world that building in Jerusalem is not limited is not subject to any sort of understandings, agreements or negotiations - we don't intend to discuss or coordinate with anyone in anyway whatsoever construction in Jerusalem," he said.

The foreign minister vowed that disagreements over a settlement freeze will not threaten the governing coalition, saying "the right will not topple the right," adding that his right-wing Yisrael Beitenu party would stay in the coalition even if a freeze is enacted.

Lieberman added that Israel will need to seek a reiteration of the understandings reached with the Bush administration in regard to settlement construction.

EU urges Israel to dismantle 'illegal' settlements'

The European Union on Tuesday urged Israel to "immediately end settlement activities" and dismantle all outposts erected since March 2001.

"Settlements are illegal under international law and constitute an obstacle to peace," the Swedish presidency of the EU said in a statement.

"The European Union reiterates its call on Israel to immediately end settlement activities, including in East Jerusalem and including natural growth, and to dismantle all outposts erected since March 2001," the EU presidency said.

EU foreign ministers said at a meeting in Stockholm on Friday that they expected Israel to announce such a freeze ahead of possible talks in New York between US President Barack Obama, Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas on the sidelines of the upcoming UN Security Council General Assembly.