Sweden's new government on Thursday recognized a Palestinian state at a time of increased tensions between Arabs and Jews over Israel's plans to build about 1,000 housing units in east Jerusalem.

The EU member country joined only two other Western European countries - Malta and Cyprus - that have officially recognized a Palestinian state.

Foreign Minister Margot Wallstrom said the Scandinavian country had decided on the move because the criteria of international law required for such recognition had been fulfilled.

"There is a territory, a people and government," she told reporters in Stockholm.

Wallstrom said she hopes Sweden's "excellent cooperation (with Israel) would continue" nevertheless and that the decision would be met in Jerusalem "in a constructive way."

Israel was quick to condemn Sweden's move, however.

Israeli Foreign Minister Avigdor Lieberman described it as "a miserable decision that strengthens the extremist elements and Palestinian rejectionism."

"It's a shame that the government of Sweden chose to take a declarative step that only causes harm."

The 28-nation European Union has said it would recognize a Palestinian state "when appropriate," and has urged that negotiations to achieve a two-state solution be resumed as soon as possible.

In a symbolic move, British lawmakers earlier this month voted in favor of recognizing Palestine as a state.