European Union (EU) foreign ministers on Monday urged Israel and the Palestinians to take immediate steps to resume peace negotiations.

They called on the Israeli government to commit unequivocally to the two-state solution and welcomed Israeli Prime Minister Benjamin Netanyahu's commitment to a peace that would include a Palestinian state.

"It is very important that we see from the new Israeli government and the prime minister for the first time the mentioning of the two-state solution. This is a very important first step," EU External Relations Commissioner Benita Ferrero- Waldner told reporters.

She later said this step gives rise to new hope in the Middle East.

EU foreign and security chief Javier Solana urged Israel to implement Netanyahu's commitment rapidly and engage in peace negotiations with the Palestinians.

The EU foreign ministers, however, expressed deep concern about Israel's settlement activities, house demolitions and evictions in the occupied Palestinian territories.

"The council (of ministers) urges the government of Israel to immediately end settlement activities, including in East Jerusalem and including natural growth, and to dismantle all outposts erected since March 2001," said the foreign ministers in a statement.

"It reiterates that settlements are illegal under international law and constitute an obstacle to peace."

The ministers, meeting in Luxembourg, also asked Israel to lift blockades on Gaza. "The European Union calls for the immediate and unconditional opening of crossings for the flow of humanitarian aid, commercial goods and persons to and from Gaza without which the unimpeded delivery of humanitarian aid, reconstruction and economic recovery will not be possible."

The ministers welcomed the declared readiness of the Israeli government to promote Palestinian economic development, stressing that this can only be achieved within the framework of the broader perspective of the two-state solution.

The ministers called on all partners to contribute actively to the achievement of a comprehensive settlement of the conflict. " The EU urges Arab countries and other partners to be forthcoming, both politically and financially, in assisting the Palestinian Authority."

The EU asked Israel and all Arab countries to take confidence building measures in order to overcome mutual mistrust and to create an atmosphere conducive to conflict resolution. "Solutions to the various conflicts including a lasting settlement for the conflicts between Israel and Syria and between Israel and Lebanon must be pursued in parallel, creating mutually reinforcing processes. In this regard the EU expects that Syria and Israel resume peace negotiations."