JERUSALEM, Oct 13 (Reuters) - U.N. Secretary-General Ban Ki-moon called on Israel on Monday to scrap plans to expand settlements in East Jerusalem, which Palestinians want as the capital of a future state, and urged both sides to return rapidly to peace talks.
Israel captured the West Bank, Gaza Strip and East Jerusalem in the 1967 Middle East War and annexed the city's eastern half in a move not recognized internationally. Palestinians seek to establish statehood in the three territories, while Israel considers Jerusalem its eternal and indivisible capital.
Ban criticized Israel's latest settlement growth plan after meeting Prime Minister Benjamin Netanyahu in Jerusalem as part of a visit to the region a day after Western and Arab nations pledged $5.4 billion at a Cairo conference to help rebuild Gaza.
The densely populated coastal enclave was widely devastated in a July-August war between Israel and Hamas Islamists who took control of Gaza after the Israelis withdrew from it in 2005.
Earlier this month, Israel announced plans to build 2,600 housing units in the "neighborhood" of Givat Hamatos on occupied land on the southeast fringes of Jerusalem, close to the Palestinian West Bank city of Bethlehem.
The move, which critics say would cut Palestinians off from Jerusalem, forming a ring of Jewish settlements around the southern flank of the city, has already been roundly denounced by the United States and the European Union.
Ban said the plans were a "clear violation" of international law. "This does not send the right signals and I urge the government of Israel to reverse these activities."
Alluding to the Gaza war that ended with an Aug. 26 truce, Ban said that "after this difficult summer for Israelis and Palestinians, both sides need to take steps to build trust."
Ban will visit Gaza on Tuesday to see first hand what is required to rehabilitate the densely populated enclave of 1.8 million people, where around 20,000 homes were destroyed by Israeli shelling and air strikes in the July-August conflict.
More than 2,100 Palestinians, most of them civilians, were killed in the 50-day conflict, while 67 Israeli soldiers and six civilians in Israel also died, making it the deadliest war fought with Hamas since Israel pulled settlers out of Gaza.
Peace talks between the sides collapsed in April, with the Palestinians frustrated by Israel's ramped-up settlement building and Israel angered by the Palestinian Authority's decision to form a unity government with Hamas.
Ban urged both to return to negotiations on a two-state solution quickly, "with a readiness to make the tough and necessary compromises."
U.S. Secretary of State John Kerry said on Sunday he hoped the larger-than-expected commitment of funds to rebuild Gaza would also bring about "renewed commitment from everybody to work for peace." (Additional reporting by Maayan Lubell; Writing by Allyn Fisher-Ilan; Editing by Mark Heinrich)