BRUSSELS - The European Union warned Israel of unspecified consequences Monday if it goes through with plans to build thousands of new settler homes in Jerusalem and the West Bank.

The bloc's 27 foreign ministers said they were "deeply dismayed" by Israeli plans to expand settlements in East Jerusalem and particularly the E1 project, which would separate the West Bank from East Jerusalem, the Palestinians' hoped-for capital, and drive a big wedge between the northern and southern flanks of the West Bank.

"The E1 plan, if implemented, would seriously undermine the prospects of a negotiated resolution of the conflict by jeopardizing the possibility of a contiguous and viable Palestinian state and of Jerusalem as the capital of two states," the ministers said in a joint statement. "It could also entail forced transfer of civilian populations."

The EU views any Israeli settlements on territory occupied during the 1967 Mideast war as a breach of international law.

"The EU will closely monitor the situation and its broader implications and act accordingly," the ministers said.

The new settlement plans have drawn widespread international condemnation, with the U.S. also urging Israeli Prime Minister Benjamin Netanyahu to call off the plans.

The Israeli government called the EU focus "mistaken."

"Facts and history both prove that Jewish settlement never constituted an obstacle to peace," said Israeli Foreign Ministry spokesman Yigal Palmor.

Swedish Foreign Minister Carl Bildt, speaking as ministers gathered for Monday's meeting, said the Israeli plans had caused "extreme concern" in Europe.

"What the Israelis did on E1 has shifted opinions in Europe," Bildt said. "I don't think the Israelis are aware of this."

Some advocacy groups want the EU to prohibit the sale of goods made by Israeli settlers from being labeled as made in Israel. The labeling issue may come up but was not officially on the agenda.

The 27 EU foreign ministers also considered the crisis in Syria, where activists say more than 40,000 people have died since an uprising against President Bashar al-Assad began in March 2011. They were briefed by Mouaz al-Khatib, a moderate cleric who heads the new, Western-backed opposition coalition in Syria. Hard-line Islamist groups have not joined the new coalition, and Khatib told the EU ministers about attempts to unify the Syrian opposition as the coalition seeks greater diplomatic recognition.

The EU does not itself offer formal recognition - that is left to the individual member countries - but it has said the coalition is a legitimate representative of the Syrian people.