German Chancellor Angela Merkel yesterday raised the pressure on Israel to freeze its settlement building programme in occupied territory and to resume the peace process with the Palestinians.

"We must make progress in the peace process... and a stopping of the settlement (building) is very important," Ms Merkel said at a joint news conference with Israeli Prime Minister Benjamin Netanyahu in the German capital.

"Time is of the essence," she said.

Palestinian President Mahmoud Abbas has said he will only restart talks with Israel if Israel freezes Jewish settlement construction in the West Bank.

Israel has so far resisted US President Barack Obama's calls to stop building settlements to enable talks to resume.

About half a million Israelis live in settlements built in the West Bank and East Jerusalem in territory captured by Israeli forces in the 1967 Middle East War.

The international community considers them to be illegal and Palestinians say they undermine their aspirations for their own state on the land.

Ms Merkel's stance chimes with the positions of EU states and the US, but German politicians have traditionally refrained from criticising Israel, aware of an obligation towards the Jewish state after the Nazi Holocaust.

Mr Netanyahu, a right-wing leader in office since March, has pledged not to build any new settlements but wants to enable what he calls "natural growth" of existing enclaves.