President Shimon Peres rejected European Union criticism of his country‘s settlement policy during a visit to Brussels on Wednesday, arguing that it did not stand in the way of peace in the Middle East.

EU President Herman Van Rompuy said there would be no sustainable peace until Palestinian aspirations for statehood and sovereignty, and those of Israel for security, were fulfilled by a comprehensive deal based on the two-state solution.

"For these reasons I have recalled the opposition of the European Union to the illegal expansion of settlements," Van Rompuy said.

But Peres replied that an acceptable solution to the settlement issue had been found years ago, based on a land swap deal with the Palestinians.

"I don‘t take this criticism that, because of the settlements, we lost the chance of implementing the two-state solution," Peres said, adding that the EU could help to overcome other problems.

"The most important difficulty is not settlements but terror," the Israeli president said. "Take terror out of Gaza and they have a free place, it has nothing to do with Israel."

"Condemn the Hamas ... because they are a center of terror," Peres said, referring to the movement which controls the Gaza strip. "And Hezbollah the same," he added.

The EU has come under pressure recently to list Hezbollah as a terrorist organization, after member state Bulgaria accused the Shiite Lebanese group of being behind a July attack that killed five Israeli tourists and their bus driver in the Black Sea resort of Burgos.

It was not known if the issue came up when Peres met his Bulgarian counterpart Rosen Plevneliev - who was also visiting Brussels - for a Holocaust commemoration event earlier in the day.

Publicly, the Israeli president spoke about the huge advances Bulgaria and Europe had made by overcoming centuries of war.

"I know that Bulgaria is going through an economic crisis," Peres said, adding however that this was better than "death in wars or in gas camps."

"I know many people are criticizing Europe," Peres said.

"They forget to compare Europe with the actual past that Europe has experienced," he added. "Thousand years of bloodshed, of hatred, of suspicion, of impatience, of killing each other."

On Tuesday, Peres bestowed upon 22 Belgian citizens an award granted to non-Jews who risked their lives to save Jews from Nazi persecution, deportation and extermination.

He was due Thursday to meet with European Commission President Jose Manuel Barroso and NATO Secretary General Anders Rasmussen, before travelling next week to the French city of Strasbourg where the European Parliament will be in session.