Western powers press Israel to rein in settlers, halt expansion

ROME, May 22 (Reuters) - Israel must halt the expansion of settlements in the West Bank and curb growing settler violence, seven major Western nations said on Friday, accusing the Israeli government of aggravating tensions in the West Bank.

"Over the past few months, the situation in the West Bank has deteriorated significantly," Britain, Italy, France, Germany, Canada, Australia and New Zealand said in a joint statement.

"Settler violence is at unprecedented levels. The policies and practices of the Israeli government, including a further entrenchment of Israeli control, are undermining stability and prospects for a two-state solution."

The Israeli government did not immediately comment on the statement.

The statement underscores growing anger in many Western countries over Prime Minister Benjamin Netanyahu's government, which has expanded settlements in the occupied West Bank in a move that diplomats say is aimed at burying the idea of a Palestinian state.

It called on Netanyahu's coalition to hold settlers to account for violence against Palestinian residents and investigate allegations of abuse by Israeli forces.

The seven nations said historic status quo arrangements governing the holy sites in Jerusalem had to be upheld and financial restrictions on the Palestinian economy lifted.

They also called on Israel to halt its controversial E1 settlement projectthat would slice through land which the Palestinians seek for a state, saying construction there would "mark a serious breach of international law".

They warned companies not to bid for construction tenders in E1or any other settlement developments.

"They should be aware of legal and reputational consequences of participating in settlement construction including the risk of involving themselves in serious breaches of international law," the statement said.

(Reporting by Crispian Balmer, editing by Gavin Jones and Chiara Rodriquez)