JERUSALEM — Israel's government on Monday approved an investigation into the deadly raid on a flotilla trying to break the blockade of Gaza, rejecting calls for an international inquiry but allowing the participation of two accomplished foreign observers to try to deflect the criticism.

Demonstrating that Israel is still under pressure, representatives of the 27-nation European Union called the three-year blockade unacceptable. In a step toward easing the embargo, the EU offered to renew its role in helping supervise Gaza's volatile border crossings.

The European Union call added to the intense pressure Israel has faced to lift the blockade since the flotilla raid. Israel and Egypt imposed the blockade in 2007 in an attempt to squeeze the Islamic militants of Hamas, who had just seized control of the Gaza Strip.

The most notable dissent has come from President Barack Obama, who called the Gaza closure unsustainable. The U.S. pressure resonates more with the Israelis because of their close alliance with Washington.

Hoping to deflect some of the criticism triggered by the May 31 naval raid, Israel announced it would allow two prominent figures from abroad to observe its inquiry: David Trimble, a Nobel peace laureate from Northern Ireland, and Canada's former chief military prosecutor, retired Brig. Gen. Ken Watkin.

Trimble, a member of the British House of Lords, belongs to a pro-Israel faction in the parliament. Watkin has been a visiting fellow in the human rights program at Harvard Law School.

The participation of Trimble -- who, like most Protestants in Northern Ireland, closely identifies with Israel -- as well as the limited scope of the inquiry could draw criticism in some corners.

Palestinian President Mahmoud Abbas rejected Israel's investigation plan, asserting that it falls short of UN Security Council demands for an "impartial" investigation.

Turkey condemned the Israeli plan as insufficient and threatened to sever what remains of its tattered relations with the Jewish state. Nine Turkish activists were killed in the Israeli raid.

Netanyahu said the commission would not be allowed to interview any soldiers except Israel's military commander. The army is conducting its own inquiry. Instead, the probe will largely focus on legal issues, such as Israel's position on the Gaza blockade and its decision to take action in international waters.

Speaking after the Cabinet vote to approve the inquiry, Netanyahu told members of his Likud Party that "difficult days lie ahead" but that forming the commission was the best of a series of poor options.

"I want to make it clear that the flotilla to Gaza was not a one-time event. We are in the midst of a tough and continuous struggle against the state of Israel," he said.

"This obstacle of hate is being led by Israel's enemies in the world," he said. "They are trying to strip us from the right to self defence, Israel's right in general to self-defence and the right of Israeli soldiers to protect themselves in particular," he added.

The five-member commission will be headed by retired Israeli Supreme Court judge Yaakov Turkel. It will also include 93-year-old international law expert Shabtai Rosen and retired Maj. Gen. Amos Horev, the former head of Israel's prestigious Technion university.

It's unclear when the commission will begin working and no deadline has been set for it to complete its inquiry, according to a participant in Monday's Cabinet meeting who spoke on condition of anonymity because the session was closed.

In rejecting an international investigation, Israel argued that the United Nations and other global bodies have a long history of bias against Israel. But in consultation with its key U.S. ally, Israel agreed to add the two high-ranking foreign observers to try to bolster the credibility of its investigation.

Netanyahu said he was confident the makeup of the commission would blunt international criticism and prove Israel handled the affair responsibly.

The White House has backed Israel's inquiry, calling it "an important step forward."

In the raid, Israel says the Turkish ship leading the flotilla was carrying dozens of trained militants who had prepared to confront the soldiers. It has released videos showing the activists attacking the soldiers with clubs, metal pipes and knives.

The activists say they were only defending themselves, and some members of the international community, particularly Turkey, have accused Israel of using excessive force and acting illegally in international waters.

In Luxembourg, Mideast mediator Tony Blair said Monday he hopes Israel will soon ease the three-year-old blockade by allowing commercial goods and reconstruction materials to flow into the Palestinian territory.

Israel refuses to allow cement, metal and other building materials into Gaza, fearing Hamas will use them to build weapons. The sanctions have prevented Gaza from repairing much of the damage inflicted during an Israeli military offensive early last year.

Netanyahu says he is open to ways to deliver more civilian items to Gaza, but he remains opposed to lifting the blockade altogether.

Israel says it is needed to prevent Hamas, which has fired thousands of rockets into Israel, from rearming. Israel also wants to pressure Hamas to release a captured Israeli soldier it has held for four years.

But critics say the blockade has hurt the vast majority of Gaza's 1.5 million people, while failing to weaken Hamas.

In Luxembourg, the EU described it as "unacceptable and politically counterproductive." It said talks would continue with Israel, Abbas' government and the international community to find a way to reopen the borders. Adding to the difficulty, the EU, like the U.S. and Israel, consider Hamas a terrorist group and do not have direct contacts.

Among the proposals being floated are giving the EU, which managed Gaza's main passenger crossing with Egypt before the Hamas takeover, a renewed role.

EU officials including Blair said there were indications Israel may agree to relax its blockade of Gaza by opening at least one border crossing to large-scale commercial traffic. EU diplomats also said Israel would likely drop its restrictive list of goods permitted into the region, and instead, maintain a short list of items banned because of security concerns.

One diplomat said Israel rejected a proposal for cargo to be delivered by ships checked in a third location such as Cyprus.