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Foreign Minister Avigdor Lieberman said on Tuesday that Israel is ready to hold direct peace talks without preconditions with the Palestinians, Syria, and Saudi Arabia, though he reiterated Jerusalem's stance that West Bank settlement construction should be allowed to accommodate natural growth.

"There is understanding in the U.S. and in Europe with regards to the basic need to continue natural growth," Lieberman told Israel Radio, while on official visit in Europe. "We have no intention of changing the demographic balance in the West Bank and establishing facts on the ground."

Settlements featured prominently in talks on Monday between Lieberman and 27 European Union foreign ministers in Luxembourg. Although senior EU figures did not work to stop the upgrading of relations with Israel, they said additional progress would depend on the peace process with the Palestinians. The announcement effectively stops the upgrading, at least until Israel and the Palestinians resume negotiations.

The EU foreign ministers held a few hours of consultations before their meeting with Lieberman, releasing a statement very critical of Israel afterward. France and Belgium led the criticism, and Netanyahu is likely to hear similar messages when he goes to Paris next week.

The ministers said in a statement they "welcomed the initial step" of Netanyahu's speech, but added it was not enough and that Israel had to unequivocally state its support for the two-state solution.

The EU "remains deeply concerned by settlement activities" and urged the Israeli government to "immediately end settlement activities, including in East Jerusalem and including natural growth," the statement said, reiterating the position that settlements are illegal according to international law and are an obstacle to peace.