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German Chancellor Angela Merkel and Palestinian President Mahmoud Abbas shake hands after a statement in Berlin, Germany, March 24, 2017. REUTERS/Pawel Kopczynski

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BERLIN (Reuters) - German Chancellor Angela Merkel said on Friday she was concerned about Israel's building of settlements in the occupied West Bank, which she said was undermining progress towards a two-state solution for Israel and the Palestinian territories.

Israel is building settlements in the occupied West Bank and East Jerusalem - seized by Israel in a 1967 war and occupied for nearly 50 years - where Palestinians want to establish their state and capital.

"As before, I see no reasonable alternative to the goal of a two-state solution," Merkel told reporters before holding talks with Palestinian President Mahmoud Abbas in Berlin.

On the issue of the settlements, she added: "I am very concerned about developments in the West Bank, which are leading to an erosion of the basis for a two-state solution."

(Writing by Paul Carrel; Editing by Michelle Martin)

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