Germany severely condemned a new Israeli law which enables the expropriation of private Palestinian land on Wednesday, saying that that the law's enactment by the Knesset on Monday has shaken Germany's faith in Israel's commitment to peace.

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"Many in Germany who stand by Israel and feel great commitment toward it find themselves deeply disappointed by this move," the German Foreign Ministry spokesperson said.

"Our trust in the Israeli government's commitment to the two-state solution has been fundamentally shaken ," he said.

The new law allows the state to declare private Palestinian land on which settlements or outposts were built, “in good faith or at the state’s instruction” as government property, and deny its owners the right to use or hold those lands until there is a diplomatic resolution of the status of the territories.

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The measure provides a mechanism for compensating Palestinians whose lands will be seized. A landowner can receive an annual usage payment of 125 percent of the land’s value as determined by an assessment committee for renewable periods of 20 years, or an alternate plot of land if this is possible, whichever he chooses.

Attorney General Avichai Mendelblit continues to oppose the bill, and figures in his circle stressed that he does not intend to defend it, even in its current formulation, in the event that petitions against it are filed in the High Court of Justice.

In his remarks, the German spokesperson noted Mendelblit's reservations regarding the law and said that it would be best to legally examine the law as soon as possible.

"We hope and look forward to the Israeli government renewing its commitment for the two-state solution to be reached through negotiations, and prove it by actual steps in accordance with the Middle East Quartet's demand," he said.

"After the puzzling remarks by several cabinet ministers who have publicly called for the annexation of parts of the West Bank, and are preparing bills for that purpose, this is now a question of credibility," he said.

Germany's strong remarks joined criticism of the law by the European Union, Britain, France, Turkey, Jordan and the UN secretary general, who have all spoken out against the law in the past two days.

France called on Israel to "take back" the law "to honor its international commitments" and Britain said the law "damages Israel’s standing with its international partners" and threatens "the viability of the two-state solution."

At the same time, a summit between Israel and the European Union scheduled for February 28 had been postponed following the passage of the controversial law, diplomats told Haaretz. The meeting was meant to mark the tightened cooperation between Israel and the EU and to set out a work plan and priorities for improving relations between the sides.

The U.S., for its part, has kept silent about the new law. A senior official said the U.S. will not respond until Israel's Supreme Court rules on the petition against the law. "This is the first time since 1967 that Israeli civil law is being applied directly to the West Bank, and that Israel's attorney general has stated publicly that he will not defend it in court," he said.