WASHINGTON — The United States Thursday warned Israel that continued settlement activity in East Jerusalem was “counterproductive” to efforts to reach a peace deal with the Palestinians. Reacting to reports Israel is planning more than 1,000 new settler homes in East Jerusalem, State Department spokeswoman Jen Psaki called on both sides to take action to build confidence needed to build a lasting peace. “As the president has said, Israelis must recognize that continued settlement activity and new housing construction in East Jerusalem is counterproductive to the cause of peace, and that an independent Palestine must be viable with real borders that have to be drawn,” she said. “The US position on settlements is clear and has not changed: we do not accept the legitimacy of continued Israeli settlement activity, which would undermine peace efforts and would contradict Israeli commitments and obligations,” she said. Danny Seidemann, Director of Jerusalem settlement watchdog Terrestrial Jerusalem, said contracts had been signed for 300 homes in Ramot and another 797 plots were to be offered for sale in Gilo. Both are in mainly Arab areas of Jerusalem which were occupied by Israel in the 1967 war and later annexed in a move never recognized by the international community. Saeb Erakat, a top Palestinian negotiator, warned that the construction plans were “destroying” efforts by US Secretary of State John Kerry to revive the peace process. Israel said the plans were not new and accused the Palestinians of seeking a pretext to avoid a resumption of direct talks, which broke down in 2010. Erakat accused Israel of having “a systematic plan for destroying Kerry's efforts which involves an escalation of settlement building, a displacement of the population of the Jordan Valley, an increase of settler attacks against our people and confiscation of our land.” Settlement construction was the issue which brought about a collapse of peace talks in September 2010 and the Palestinians say they will not return to negotiations while Israel builds on land they want for a future state. — Agencies