BRUSSELS, Sept 14 (Reuters) - The European Union will double its aid for Palestinian development and the Palestinian Authority to 200 million euros in 2012, the EU executive said on Friday.

The development aid will be focused on water, sanitation and support for refugees. A further 100 million euros aid credits unspent last year will be also spent in 2012, the European Commission said in a statement.

The decision shows our commitment to help the people of Palestine in the areas which are vital to their everyday lives, said Stefan Fuele, EU commissioner for enlargement and European neighborhood Policy.

The European Union has been critical of Israeli settlement building and curbs on economic development in the occupied West Bank. EU foreign ministers in May expressed deep concern, saying that such moves made it impossible to create a Palestinian state alongside Israel.

The ministers accusing Israel of accelerating settlement construction and demolishing Palestinian buildings.

Israel condemned that report as biased, saying the report would do nothing to help promote peace in the region.

The funds announced Friday include 7 million euros in support for Area C, the 60 percent of the West Bank which is under Israeli control and where most Jewish settlements are located.

Area C contained natural resources and land which are crucial to the future economic growth of a Palestinian state, Friday's Commission statement said.

It is currently almost impossible for Palestinians and international donors to obtain building permits in the area, and community buildings and essential basic infrastructure (like rainwater harvesting cisterns) are regularly demolished, the Commission said.

(Reporting by Sebastian Moffett; Editing by Alison Williams)