The Israeli announcement on Thursday also drew swift US condemnation while Palestinian officials complained that it was undercutting US peace efforts at a sensitive time.
Israeli settlement building lies at the heart of the impasse over restarting negotiations on the terms of a Palestinian state alongside Israel. The Palestinians hope to build their state in the West Bank, Gaza and east Jerusalem, lands Israel captured in 1967.
Yesterday, Ban's spokesman said the UN chief was concerned about the latest move.
"These are unhelpful decisions that undermine progress towards the two-state solution," spokesman Martin Nesirky said. "They constitute a deeply worrisome trend at a moment of ongoing efforts to re-launch peace negotiations."
Also yesterday, unknown vandals torched two vehicles in an Arab neighbourhood of Jerusalem in what police said appears to be the latest attack carried out by Jewish extremists.
The phrase is usually used by Jewish extremists to protest what they perceive to be the Israeli government's pro-Palestinian policies, and to let Palestinians know who attacked them.
Vandals have targeted mosques, churches, dovish Israeli groups and even Israeli military bases with "price tag" graffiti over the years. In recent weeks, there has been a steady stream of such incidents, including an Arab Christian graveyard vandalised on Thursday and a Jerusalem church defaced two weeks ago.
Rosenfeld said police were searching for the perpetrators.
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