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Berlin severely condemned the new law, saying that its enactment by the Israeli parliament has shaken Germany's faith in Israel's commitment to peace and that the law should be legally examined as soon as possible.
"Many in Germany who stand by Israel and feel great commitment toward it find themselves deeply disappointed by this move," the German Foreign Ministry spokesperson said. "Our trust in the Israeli government's commitment to the two-state solution has been shaken to its foundations."
Calling the law "another blow to the two-state solution," France urged Israel to scrap the legislation "to honor its international commitments." The French foreign minister also noted that the closing statement by the Paris peace summit concluded that the two-state solution is the only way to bring just and sustainable peace to the Middle East.
The U.K. condemned the law, saying it "paves the way for significant growth in settlements," which threatens the chance of establishing a two-state solution and hurts Israel's international standing.
Before the law was passed, Britain's leader Theresa May warned Prime Minister Benjmain Netanyahu during their meeting in London on Monday that the bill is unhelpful and would make things more difficult for Israel's friends around the world.
The European Union's foreign policy chief slammed the law, saying it "crosses a new and dangerous threshold" by "effectively authorizing the confiscation of privately owned Palestinian land in occupied territory."
"Should it be implemented, the law would further entrench a one-state reality of unequal rights, perpetual occupation and conflict," she said, noting that the law not only runs contrary to previous commitments by Israel, but also violates international law.
The Turkish Foreign Ministry said in a statement that the law was unacceptable and that the policy of the Israeli government destroys any basis for the two-state solution.
The kingdom's minister of information termed the law a "provocation" and stressed that it harms the possibility of the two-state solution and could lead to violent escalation in the region.
Various Palestinian officials decried the bill, saying it could kill the chances to reach a peace deal along the lines of a two-state solution. "While thousands of Palestinians in besieged Gaza are being terrorized by Israeli bombardments, the Israeli parliament has just approved a law to legalize theft of Palestinian land. Looting is illegal," the leader of the Palestinian Liberation Organization said.
A top aide to the Palestinian president said the law "kills any change left to the two-state solution" and "forces the Palestinians to rethink their relations with Israel."
Canada's Foreign Minister Chrystia Freeland said the government was very concerned by Israel's move to legalize settler homes.
"Canada is very concerned ... and we want to underline that this expansion of settlements is illegal under international law," Freeland told reporters on a conference call.
Canada is calling on all parties not to make unilateral moves which could have a negative effect, she added.
Ottawa has long backed a two-state solution to the Israeli-Palestinian conflict.