An Israeli government decision to designate nearly 1,000 acres in the West Bank as "state land" in order to expand a settlement in the Etzion bloc has led to a diplomatic furore.

The decision to re-classify the land, part of which is being farmed by Palestinian villagers, was made by the government immediately after the ceasefire in Gaza. The move was described as Israel's response to the kidnap and murder of the three teenagers two months ago by Hamas.

The announcement drew swift criticism from the Obama administration and a phone call to Benjamin Netanyahu from US Secretary of State John Kerry, who called on the Israeli prime minister to cancel the decision.

British Foreign Secretary Philip Hammond also attacked the decision saying that the settlements "are illegal under international law, present an obstacle to peace and take us further away from a two-state solution at a time when negotiations to achieve this objective urgently need to be resumed".

Foreign Minister Avigdor Lieberman defended the decision, saying: "The Etzion bloc reflects move widest consensus in Israeli society and it's clear that in any agreement, it will be part of Israel."

However, not all coalition members were in agreement. Centrist party leaders Yair Lapid and Tzipi Livni both criticised the move, saying it created unnecessary tension between Israel and its allies.

A heated argument also took place between Justice Minister Livni and Defence Minister Moshe Yaalon at the cabinet meeting last Thursday. Ms Livni, who was Israel's lead negotiator with the Palestinians, demanded the government embark on a new diplomatic initiative in the wake of the Gaza operation, while Mr Yaalon argued that talks were unthinkable while the Palestinian Authority was still adhering to the unity pact between Fatah and Hamas.

Meanwhile, the Palestinian Authority is planning to present a new diplomatic initiative later this month at the UN General Assembly.

President Mahmoud Abbas plans to demand a binding timetable for a Palestinian state to be created within three years, with deadlines for agreement between Israel and the Palestinian Authority on borders and other key issues. Mr Abbas is expected to unveil the plan next week. Palestinian sources also say that he will threaten to sign the Rome Treaty - which would enable the Palestinians to sue Israel for alleged war crimes at the International Criminal Court - if his plan is not accepted.

The IDF, meanwhile, is planning to add to its legal corps new officer-lawyers, particularly experts in international law, to help investigate any irregularities that occurred during Operation Protective Edge. If necessary, the lawyers provide legal defences for soldiers and officers charged abroad.

The commission of inquiry appointed by the UN Human Rights Council to deliver a report on the fighting in Gaza will start its investigations next month.

Since the Israeli government has refused to co-operate with the commission, its members will travel to Gaza via Egypt. The panel is headed by Professor William Schabas, who has called for Mr Netanyahu to be put on trial for war crimes.