BERLIN (Reuters) - German Chancellor Angela Merkel demanded on Thursday that Israeli settlement building in the West Bank stop, saying it endangered efforts to achieve a two-state solution with the Palestinians. I think it is now important to get commitments from all sides and that includes the issue of settlement building, Merkel said in a speech to the Bundestag lower house of parliament. I am convinced that there must be a stop to this. Otherwise we will not come to the two-state solution that is urgently needed. Merkels remarks are in line with the positions of the European Union and the United States, but were unusually clear-cut for the German leader, who regularly cites her countrys special obligation to Israel because of the Nazi Holocaust, in which six million Jews perished. Palestinian President Mahmoud Abbas has said US-backed peace talks with Israel cannot resume until all settlement activity has ceased on occupied land the Palestinians want for a state. Washington has also called for a total halt to settlement building in the occupied West Bank, a demand that has opened the most serious rift in US-Israeli relations in a decade. Israeli Defence Minister Ehud Barak said on Wednesday that Israel would consider a limited moratorium on new settlement construction, but said it should be part of a broader deal bringing Arab states into the peace process. Meanwhile, a senior official said on Thursday that Israel would not impose a complete halt on settlement construction on occupied Palestinian land as demanded by the United States. Israel will not freeze natural growth and will not suffocate the life of 300,000 Israelis who live in settlements in all legality, Deputy Foreign Minister Danny Ayalon told public radio. Ayalon made it clear he did not believe the Palestinians were willing to make any concessions. One cannot demand immediate and complete payment by Israel if the other side is not willing to take the slightest step, he said. Israeli media has said hawkish Prime Minister Benjamin Netanyahu was willing to consider a three-month construction freeze, but would exclude east Jerusalem from the moratorium, as well as the 2,000 to 3,200 private homes currently being built in the West Bank. Meanwhile, Israel on Thursday rejected an Amnesty International report that accused it of committing war crimes in the Gaza Strip, and said the human rights group was manipulated by Hamas. The slant of their report indicates that the organisation succumbed to the manipulations of the Hamas terror organisation, the Israeli military said in a statement. London-based Amnesty accused Israeli forces of war crimes, saying they used civilians, including children as human shields and conducted wanton attacks on civilians during the December-January Gaza offensive. Israel called the report unbalanced and said it presented a distorted view of the laws of war that does not comply with the rules implemented by democratic states battling terror. It ignores the efforts of the IDF (Israeli Defence Forces) to minimise as much as possible harming uninvolved non-combatant civilians, it said. It insisted Israeli forces used various fighting methods and advanced technology to minimise harm to the civilian population while engaging terrorists who were operating from densely populated areas and using the local population as 'human shields. Amnesty said it found no evidence the Hamas rulers of Gaza had used civilians as human shields, but claimed Israeli forces forced Palestinian families to remain in one room of their home while using the rest of the house as a base and sniper position. Israel accused the rights group of ignoring the blatant violations of international law perpetrated by Hamas. Thirteen pages of the 117-page report are devoted to the conduct of Hamas and other Palestinian armed groups and points out the rocket attacks they carried out against Israel constitute war crimes. More than 1,400 Palestinians and 13 Israelis died during the massive offensive launched by Israel in response to rocket fire from Palestinian militants.