"There is a time-out in the furthering of the upgrading of bilateral relations," Ramiro Cibrian-Uzal, the head of the European Commission delegation to Israel told reporters. "Both sides decided it was appropriate to take a time out. Both sides realize it is a convenient time for a time-out."

"We will have to see how long and how deep the time-out is -- how the conflict stabilizes and how Israel will emerge as a partner for the EU out of the conflict," he added.

Bilateral relations have been strained by Israel's 19-day-old military offensive on Hamas targets in Gaza which medics report has so far killed more than 1,000 Palestinians. Ten Israeli soldiers and three civilians hit by Hamas rockets fired across the border have also died since Dec. 27.

Cibrian-Uzal said the move was not intended as a sanction against the Jewish state.

"There is a mutual agreement on the issue," he said. "The European Union has never contemplated to my knowledge and has never seriously envisaged sanctions" against Israel.

A spokesman for the Israeli Foreign Ministry, Yigal Palmor, confirmed that Israel had agreed to freeze the negotations.

"Both Israel and the EU agreed to suspend the talks after it was obvious that the two sides had more urgent issues to deal with," Palmor told news agency AFP.

Humanitarian organizations vindicated

The move follows pleas from humanitarian organizations urging the EU to suspend its plans to upgrade ties with Israel until there was a ceasefire in Gaza and aid was allowed to flow to the region's suffering civilian population.

"It is inconceivable that we should extend further benefits of European partnership to a government that violates international humanitarian law and refuses negotiation in favor of continued violence," Daleep Mukarji, director of Christian Aid UK and Ireland said in a statement supported by Oxfam International and the International Federation for Human Rights (FIDH) among other groups.

EU External Relations Commissioner Benita Ferrero-Waldner did not comment on the decision during a debate on Gaza held at the European Parliament in Strasbourg on Wednesday.

However, her spokeswoman Christiane Hohmann said that the priority is "to concentrate on the search for a political solution in Gaza and the access of humanitarian aid, not on the holding of technical talks."

The EU's foreign ministers decided in December to upgrade relations with Israel while at the same time calling for the Jewish state to reach out to the Palestinians and Arab nations.

Steinmeier to push again for Gaza truce

Meanwhile, efforts by EU diplomats to secure a ceasefire continue.

On Wednesday, Berlin announced that German Foreign Minister Frank-Walter Steinmeier would travel to the Middle East for the second time in a week to continue pushing for a truce.

His trip will include talks in Jerusalem with the Israeli government as well as visits to the Ramallah and Cairo, his spokesman Jens Ploetner told reporters.

"The goal of the foreign minister's efforts is to open a way towards a lasting and comprehensive ceasefire," Ploetner said.

Despite the alarming death toll in Gaza, French Foreign Minister Bernard Kouchner expressed his optimism that a ceasefire was in the making.

"The outlines of a ceasefire have begun to appear, even if we still have to face serious obstacles," Kouchner told the French parliament. "I'm convinced that our efforts will bear fruit."

Ban urges de-escalation

UN Secretary-General Ban Ki-moon said he was concerned at reports Wednesday of Lebanese rocket attacks against Israel and urged all parties in the region to avoid actions that could make a bad situation worse.

"That is ... a very alarming, very disturbing and troubling situation," Ban told reporters in the Jordanian capital Amman on the first day of a week-long tour of the Middle East.

Ban said that UN peacekeepers in Lebanon, known as UNIFIL, were investigating the rocket attacks launched from inside Lebanon. The incident took place on the 19th day of Israel's offensive against Hamas militants in the Gaza strip.

"I again strongly urge all the parties concerned in this region ... to refrain from taking such violent actions which will destabilize the situation," Ban said. "We are now going through a very difficult process to bring a ceasefire, to bring stability back to Gaza. Such actions are just unacceptable," he added.