William Hague has said there is "no enthusiasm" for economic sanctions on Israel from the European Union, a day after countries across Europe summoned Israeli ambassadors to protest their government's plans for West Bank settlement expansion.

At oral questions in the House of Commons on Tuesday, the Foreign Secretary said: "I don't believe there would be anywhere near a consensus nor is that our approach.

"We continue to try to bring both sides back to negotiations.

"Nevertheless, if there is no reversal of the decision that has been announced, we will want to consider what further steps European countries should take."

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A Bedouin camp is seen in the E1 area, between Jerusalem and the Israeli West Bank settlement of Maale Adumim

He said he was in touch with other European Foreign ministers about "incentives and disincentives" to force both the Israelis and Palestinians back to direct negotiations to further the two-state solution.

On Monday, Israeli ambassador to the UK, Daniel Taub, was been officially summoned to the Foreign Office. Britain warned Israel of a "strong reaction" if it continued with plans to build 3,000 new homes in the West Bank, in the contentious area of E1, which surrounds East Jerusalem.

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William Hague has said there is 'no enthusiasm' for trade sanctions with Israel

To build Israeli settlements in such an area threatens the viability of East Jerusalem as a future Palestinian capital, effectively cutting the West Bank in two.

Israel's prime minister Benjamin Netanyahu said in a press statement Sunday that he was immovable on the plans to build the homes. But Israeli media reported that the settlements were far from set in stone, and could be quietly binned after the Israeli elections in January 2013.

“No decision has been made to actually build in E1,” a government official told The Times of Israel.

“We decided to build 3,000 new units in Jerusalem and the settlement blocs and to allow planning and zoning in other areas, including E1." Around a dozen approval stages are still needed before building can commence.

Israel's left-wing newspaper Haaretz wrote a blazing condemnation of the plans to build settlements, published Tuesday.

"Netanyahu's decision to freeze the transfer of funds to the Palestinian Authority and build 3,000 housing units in the West Bank is nothing less than reckless behaviour.

"This policy is seriously threatening Israel. Friendly countries such as France, Britain and Sweden are considering recalling their ambassadors and revisiting their trade accords with Israel. This is a heavy price that cannot be explained away as an investment in national security."

But others have defended the decision to build in E1, with the Jerusalem Post's editorial, entitled "The Logic of E1" arguing the decision is "perfectly in line with our country’s interests".

"While the timing of our government’s announcement might result in negative diplomatic repercussions, building in Jerusalem and E1 protects integral Israeli interests recognised and protected by both left-wing and right-wing governments for well over a decade."