The European Union (EU) was investigating ways of pressing Israel to ditch a plan to build settlements in E1 today, but is expected to hold off on tough action soon despite international outrage over the decision.

Some officials say that options for robust steps against Israel are limited due to a lack of unanimity in the 27-member EU and diplomatic protection of the Jewish state by its cast-iron superpower ally the US.

The prospect of punitive EU measures would rise if Israel continues to flout world opinion, but noises from Britain, France and Germany do not point to strong action for now.

Still, several options are open to the EU – one of Israel's biggest trading partners – to pressure the Jewish state into ditching the settlement plan that Palestinians protest would rob them of territory crucial to their bid for a viable state and further dim chances of reviving frozen peace negotiations.

European foreign ministers, at a meeting in Brussels, were to discuss how to respond to the latest settlement plan.

British Foreign Secretary William Hague last week distanced the prospect of sanctions, and instead spoke of negotiations and formulating "incentives and disincentives" for peace talks.

France discounted sanctions and has lowered expectations of tough measures, saying the onus must be on "persuasion" and reminding Israel of "principles and condemnations".