SAARISELKA, Finland, March 13 (Luke Baker/Reuters) - The European Union could use closer trade ties as leverage to urge Israel to resume peace talks with the Palestinians, the EU's top diplomat said on Saturday ahead of a trip to the region.

EU high representative for foreign affairs, Catherine Ashton, who begins her first visit to the Middle East on Sunday, said the European Union would be active in getting peace talks to resume and had influence in the issue.

We're a huge supplier of aid and development in that region. We are strong with Israel in terms of trade and Israel wants to enhance its relationship with us, it wants to upgrade relations, she said when asked what leverage the EU could have in talks given that the United States has struggled to be heard.

Our ambition is that they know -- because they do -- that the solution lies in a negotiated settlement. Our view is that it needs to happen quickly and now, with the opportunity that that affords Israel ... to be able to enhance the relationships it wants with us in any event for the future.

Ashton, who flies to Egypt on Sunday and is due in Israel on Wednesday after stopovers in Syria, Lebanon and Jordan, said it was not about withholding Israel's access to EU markets, but about showing what more could be granted if progress was made.

What we have at the moment is a traditional relationship with Israel, they would like more, she said.

The trip to the Middle East is Ashton's most high-profile diplomatic mission since becoming the EU's high representative last December, succeeding Javier Solana, who focused much of his time in office on Iran and Middle East negotiations.

Ashton's visit comes at a sensitive time, with the United States expressing frustration with Israel on Friday over plans to build 1,600 settler homes in East Jerusalem, an announcement made while U.S. Vice President Joseph Biden was visiting.

Israel has since apologised for the timing of the announcement, but U.S. Secretary of State Hillary Clinton, in strongly worded comments on Friday, said it was not the timing of the announcement that was the problem, but the substance.

The announcement of the settlements on the very day that the vice president was there was insulting, she told CNN.

Ashton, who is holding informal talks with some EU foreign ministers and Turkey's foreign minister in Finland, told reporters she was concerned about Israel's settlement announcement but that the focus should be on getting the Israelis and the Palestinians back on track with talks.

My view remains that we have to get the talks moving and the solution lies in getting an agreement, and proximity talks are the beginning of that, she said, referring to US-led efforts to get both sides talking indirectly via mediators.

Swedish Foreign Minister Carl Bildt, who is also taking part in the meeting in Finnish Lapland, said he suspected Israel had purposefully made the announcement on new settlements, and said he had doubts about Israel's commitment to peace.

I would hope the Israelis are still interested in peace although there have been distinctly mixed signals recently, he told reporters.

I suspect the decision (to announce new settlements) was purposeful. Not by the prime minister but by someone who wanted to send that particular signal when the U.S. vice president was coming. It's certainly colored the entire relationship in a way that is detrimental to the peace process. (Reporting by Luke Baker, editing by Philippa Fletcher)