Israel's Interior Ministry has given final approval for a plan to build 1,600 new homes for Jewish settlers in East Jerusalem and said it expects to soon approve the construction of another 2,700 houses in the city.

The ministry's spokesman said Thursday the housing plans are not politically based, but rather a reaction to recent protests about the high cost of living and calls for more affordable housing in Israel.

Palestinian negotiator Saeb Erakat strongly condemned the planned construction. Palestinians want East Jerusalem as the capital of a future state and have refused to resume peace talks unless Israel stops building in the city and in the West Bank.

In Washington Thursday, White House spokesman Jay Carney urged Israel and Palestinians not to take any action that would make it harder for the two sides to come together and negotiate.

On Friday, European Union foreign policy chief Catherine Ashton expressed “deep regret” over Israel's decision. Ashton said the announcement “threatens the viability of an agreed two-state solution” and “undermines ongoing efforts to resume negotiations.”

For the last two months, hundreds of thousands of Israelis have taken part in protests against what they see as a widening gap between the country's rich and poor.