(BRUSSELS) - Israel must back the creation of a Palestinian state and 

recommit to the Middle East peace process before the EU can deepen 

ties with the Jewish state, the European Commission said Thursday.

"We believe that good and trustful relations with Israel are 

essential in order to make our voice heard," the EU's External 

Relations Commissioner Benita Ferrero-Waldner told reporters in 

Brussels.

"We do not believe, however, that the time is indeed ripe to go 

beyond the current level of relations," she added.

Late last year EU nations agreed to enhance ties with Israel but the 

idea has been a dead letter since the Israeli offensive in the Gaza 

Strip in December and January, leaving over 1,300 Palestinians dead, 

according to Palestinian figures.

The future of the troubled peace process has become more uncertain 

with the appointment of Israel's hawkish Prime Minister Benjamin 

Netanyahu, as he has not endorsed the idea of the creation of a 

Palestinian state -- a principle Israel committed to under the 2003 

international Middle East peace "roadmap."

That refusal to endorse the goal of a Palestinian state has raised 

fears that Israel's new cabinet is on a collision course with the new 

US administration which has vowed to push ahead with the peace process.

Netanyahu is scrambling to shape his cabinet's policy on the Middle 

East peace talks ahead of a planned meeting with Obama in Washington 

in May.

US President Barack Obama on Tuesday invited Arab and Israeli leaders 

to Washington and called for "good faith" gestures from all sides, 

including Israel.

"Too much remains unclear at this current point in time. And we 

expect indeed a clear commitment from the new government to pursue 

the negotiations with the Palestinians," EU commissioner Ferrero- Waldner said.

"We expect a stop of all activities undermining our objective of a 

two-state solution," she added, citing the expansion of Israeli 

settlements in the Palestinian territories "which is continuing on a 

daily basis."

"Israel knows what we have to offer and we have shown our very good 

will and our commitment to reinforce our relations but we think that 

the ball is now in the court of Israel," she said.

Ferrero-Waldner was speaking as the commission published reports on 

its "neighbourhood policy" detailing ties and problems beyond its 

borders.

In Israel, the report said, progress on promoting democracy, the rule 

of law and human rights was "limited as was cooperation with the EU 

on a comprehensive settlement of the Israel-Palestinian conflict."

Any consideration of bilateral EU-Israel relations... must take into 

account overall political developments in the Middle East," the 

report stressed.

The now-stalled plan to upgrade ties included a multiplication of 

bilateral meetings including at foreign ministers' level, with the EU 

presidency also able to invite Israeli diplomats to EU security 

meetings held among ambassadors.

The EU in December also said it would consider inviting Israel to 

take part in the civilian missions linked to its security and defence 

policy.

The European Union is the biggest supplier of aid to the Palestinian 

territories but it has little leverage in its dealings with Israel, 

which is amply supported by the United States.

The Middle East impasse has hit the EU's wider "Mediterranean 

partnership" plans which have been stalled since the Gaza conflict.

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