By David Brunnstrom

BRUSSELS, Nov 27 (Reuters) - The United Nations on Tuesday called for an end to Israeli restrictions on movement in the occupied West Bank, saying roadblocks were impeding humanitarian work, threatening lives and the future of the Palestinian state.

Karen AbuZayd, head of the U.N. Palestinian refugee agency UNRWA, said she hoped a high-stakes Israeli-Palestinian peace conference at Annapolis in the United States on Tuesday would also improve living conditions in the Gaza Strip.

She said the United Nations wanted to see a neutral body monitoring crossings in and out of the Palestinian territories.

"One thing we can say hopefully about Annapolis is that this is an internationalisation of the problem," she told a European Parliament committee. "Let us hope that something comes out of today to show that."

She described new Israeli movement restrictions in the West Bank requiring Palestinians, including UNRWA staff, to obtain crossing permits and to enter and leave East Jerusalem on foot through mechanised terminals, as "crippling".

The measures will impede humanitarian supplies as trucks had to be unloaded and reloaded at checkpoints, she said. "These new measures will impede like never before humanitarian access to hundreds of thousands of refugees," she said. "They are extremely dangerous to the economy of the West Bank and therefore to the future of the Palestinian people."

AbuZayd, whose agency has been accused by Israel of anti-Israeli bias, said the restrictions would also drive up costs and delays at a time when UNRWA was already facing a $101 million budget shortfall for 2008.

"If the international community takes no action and allows the new measures to take hold, they could become ... difficult, if not impossible, to reverse, with lethal implications for Palestinian lives and the future of the Palestinian state."

AbuZayd said the sealing of the Gaza's borders had all but severed its physical links with the outside world and reduced its supply lines by 70 percent. Israel had also announced a timetable for a gradual cut in electricity supplies from Dec. 2.

"Gaza is one of the few places in the world where this degree of calculated and indiscriminate suffering is inflicted on an entire people," she said.

Israel has stepped up travel restrictions on Gaza after the Islamic militant Hamas group seized control of the area from forces loyal to Palestinian President Mahmoud Abbas in June.

AbuZayd said increased costs of relief work and budget shortfalls meant less food distributed and fewer jobs created.

She pointed to increases in infant mortality and miscarriages and said evidence was emerging that a diet of flour, oil, lentils, milk powder and sugar provided by relief agencies was stunting the growth of children.

The situation was encouraging extremists by isolating a people and cutting them off from the world, she said.

The Annapolis talks are aimed at jump-starting negotiations for creating a Palestinian state. But no one expects a swift breakthrough between the two sides, led by Israeli Prime Minister Ehud Olmert and Abbas.

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