The European Commission on Thursday backtracked on its unusually harsh criticism of Israeli settlements, declaring that a statement released earlier this week did not reflect the commission's position.

The contentious statement accused Israel's settlement policy of strangling the Palestinian economy and making the Palestinian government more dependent on foreign aid.

The Foreign Ministry called in the EU ambassador to protest the report, accusing the commission of stepping beyond its authority in issuing such criticism and not taking into account Israel's security concerns in the West Bank.

"The press release unfortunately uses wording which does not reflect statements by the EU Commission," European Union spokesman David Kriss said Thursday.

The commission is concerned about the negative effect settlement policy has on the economic life of Palestinians, Kriss said, but added that "the reality is more complex than the statement depicts."

Meanwhile, a senior European Union official has ruled out any compromise with Israel over the issue of settlements, unless reached in the framework of a final-status agreement with the Palestinians.

Robert Rydberg, head of the Middle East desk in the Swedish Foreign Ministry, stressed on Monday it was inconceivable for the international community to legitimize natural growth of the settler population, since all settlements beyond the Green Line were illegal.

Rydberg, whose country holds the EU presidency, said the only conceivable compromise would come with Israeli and Palestinian agreement on borders in an all-encompassing final-status agreement between the two parties.

Speaking at a conference in Munich, Rydberg slammed the settlements as creating a new reality on the ground in the occupied territories and spawning obstacles, and he said that roadblocks were intended mainly to protect the settlements rather than Israel proper within the Green Line.

Rydberg said Israel's settlement policy did not build credibility among the Palestinian leadership and that Palestinian Authority President Mahmoud Abbas wanted to reach an agreement with Israel. He said the ideology that guides most settlers is based on utter denial of the rights of Palestinians in the occupied territories.

Rydberg, who also serves as deputy director general of the Swedish Foreign Ministry and is a former ambassador to Israel, noted that the United States was interested in the EU's playing an active role in the peace process, and that the U.S. meticulously coordinates its positions with the EU and other members of the Quartet.

He noted with satisfaction the latest statements by Hamas on Israel. He said that although Hamas was approaching the Quartet's demands, it still must live up to all of the Quartet's conditions before the latter would engage with the Islamic group.

He also said the EU was trying to "close gaps" with Arab countries like Syria and Libya, in a bid to engage them in the efforts to make progress in resolving the Middle East conflict.

Rydberg said the situation in Iran was likely to influence the Israeli-Arab conflict, but also that progress in the peace process was as likely to influence players affiliated with Iran in the region, such as Syria, as well as the positions of organization like Hamas and Hezbollah.

He said the Middle East will be given much attention during the Swedish presidency of the EU, as his government, like others in Europe, has political, security and economic interests in the region.