STOCKHOLM; Sweden's new prime minister announced Friday that the country will recognise a Palestinian state, becoming the first EU member in Western Europe to do so.

Social Democrat leader Stefan Loefven -- who won last month's general election -- said the Nordic country wanted to bolster a two-state solution to the Israeli-Palestinian conflict.

Washington reacted quickly calling Stockholm's recognition "premature", while Palestinians cheered the decision as "courageous" and urged the rest of the European Union to follow suit.

"A two-state solution requires mutual recognition and the will to co-exist peacefully," Loefven said in his inaugural address to parliament.