BRUSSELS (Reuters) - Israel's decision to build new settlements far inside the West Bank weakens prospects for peace with the Palestinians, the European Union's diplomatic service said on Friday, echoing U.S. criticism that a two-state solution was at risk.

In a statement, the European Union External Action Service said Israel had broken with public statements not to build new settlements, calling the plans "effectively a new settlement in the northern West Bank."

"The decision to continue settlement building and expansion... weakens rather than strengthens the prospects for a two-state solution to the Middle East peace process, and makes the possibility of a viable Palestinian state more remote," the EEAS said in a statement.

On Wednesday, U.S. State Department spokesman Mark Toner said the move was "deeply troubling" partly because it came after Israeli agreement with Washington on U.S. military aid designed to bolster Israel's security, he said.

The United States has agreed to give Israel $38 billion in military aid over the next decade, the largest such package in U.S. history, under a landmark agreement signed on Sept. 15.

Germany also spoke out this week, reiterating a long-held EU position that settlements are illegal under international law.

(Reporting by Robin Emmott; editing by Philip Blenkinsop)