RAMALLAH, West Bank, May 24 (Reuters) - A group of 80 international aid agencies urged the European Union on Saturday to follow through on pledges it made last year to back Palestinian communities seen as vulnerable to Israeli settlement expansion in the occupied West Bank.

Not enough action has been taken since EU foreign ministers last May urged Israel to ease curbs to growth on Palestinian villages and criticized its settlement policies, the Association of International Development Agencies (AIDA) said in a report.

British Foreign Secretary William Hague and U.S. Secretary of State John Kerry visited the West Bank this week to try to revive peace talks for an Israeli-Palestinian two-state solution they say may become impossible with more settlement expansion.

More than 600 settler houses have been built since last May while Israel demolished 535 Palestinian-owned homes and structures, including 30 built with EU funding, displacing 784 Palestinians, the AIDA report said.

It said Israel had approved plans to build 1,967 new settler homes since last May, up four-fold from the year before.

Israel is morally and legally responsible for the wellbeing of Palestinian men, women and children ... EU countries have an obligation to address violations of international law and collectively put pressure on Israel to end policies impeding Palestinian development, Tony Laurence of Medical Aid for Palestinians wrote.

The findings focus on a contiguous tract making up around two-thirds of the West Bank dubbed Area C. Interim 1993 peace accords put the area under full Israeli military and civil control. Palestinians got smaller, disparate patches to govern.

The division was meant to be temporary and last only a few years pending a pact ending the conflict. That has not happened.

Some 150,000 Palestinians, many of them poor farmers and shepherds, along with 325,000 Israeli settlers live in Area C.

IMPASSE OVER TERRITORY

Palestinians want all of the West Bank, Gaza and East Jerusalem - lands captured by Israel in the 1967 Middle East War - for a future independent state. Israel has agreed in principle to Palestinian statehood but wants to keep all of Jerusalem as its undivided capital along with blocs of West Bank settlements.

Most world powers do not recognize Israeli sovereignty in East Jerusalem and deem the settlements illegal.

The EU last year called for halting forced transfer of population and demolition of Palestinian housing and infrastructure, simplifying administrative procedures to obtain building permits ... and addressing humanitarian needs.

Since then, AIDA said, Israel has rejected 94 percent of Palestinian requests to build in Area C. Israel has yet to approve 32 EU-funded master plans to develop Palestinian villages filed since 2009, holding up the projects, AIDA said.

In April, Kerry pledged to unfurl within a week a U.S.-backed investment initiative to support Palestinians in Area C. The plan appears to be stalled due to Israeli objections.

Israel has made clear it will not permit independent Palestinian economic development in Area C.

It was very clear in the (1993 interim) Oslo Accords ... that Israel has control of the economy and security in Area C, Regional Cooperation Minister Silvan Shalom told Reuters.

I am not going to open the Oslo Accords just for resuming the negotiations, he said in an interview on Tuesday.

In a statement to Reuters, the EU mission in Jerusalem said the EU had driven international efforts to get Israel to meet commitments on Palestinian living conditions in Area C but any change hinged on Israeli engagement on this issue. (Reporting by Noah Browning and Crispian Balmer; Editing by Mark Heinrich)