Former Israeli Prime Minister Ehud Olmert (C) greets an unidentified guest at a reception during the 2012 Saban Forum on U.S.-Israel Relations gala dinner at the Willard Intercontinental Hotel in Washington, November 30, 2012. [Photo/Agences]

JERUSALEM - Former prime minister Ehud Olmert said on Saturday that the government of Benjamin Netanyahu was taking Israel into unprecedented isolation with its policy on Jewish settlements.

He singled out Israel's recent announcement that it would build new settlement homes in the E1 corridor near Jerusalem. The plan has sparked international protest.

Olmert said such plans had been around for years. But making the announcement days after the United States sided with Israel against the Palestinians' successful bid for de facto statehood recognition by the U.N. General Assembly was a slap in the face to the Jewish state's main ally.

"Bibi Netanyahu," he said, using the prime minister's nickname, "is isolating Israel from the entire world in an unprecedented way, and we will pay a high price in every facet of our lives, and the Israeli public should know it."

The settlement plans have provoked worldwide condemnation, with the United Nations, the United States and the European Union all voicing criticism of the project which they see as complicating any attempts at peace with Palestinians.

In Berlin this week, German Chancellor Angela Merkel urged Netanyahu to avoid "one-sided moves".

Olmert, speaking on Israel's "Meet the Press", said he did not embark on a widely expected bid to run in Israel's upcoming January election due to a lack of unity in the centre-left bloc, as well as lingering legal troubles.

A former head of the centrist Kadima party, Olmert was in July largely cleared of corruption charges that had forced him from office in 2008.