Palestinian President Mahmoud Abbas and Swedish Foreign Minister Margot Wallstrom inaugurated a new Palestinian embassy in Stockholm on Tuesday, coming after it recognised Palestine as a state last October.

The inauguration ceremony, which marks the upgrading of Palestinian diplomatic representation in Sweden, was attended by a large number of Arab and foreign diplomats and politicians, the Palestinian Maan news agency reported.

Wallstrom expressed gladness at the step, hoping for the enhancement of bilateral relations between the two countries in all domains. Abbas, in a joint press conference held with Sweden's Prime Minister Stefan Loefven, pointed out that Sweden's recognition of Palestine will "push forward peace negotiations on the basis of international decisions that cannot be disregarded."

"This act shows the morality of Sweden's positions in political and diplomatic issues; they are balanced and just. We hope that the governments of the European states will recognise Palestine upon the recommendations of their parliaments," Abbas was quoted as saying.

About 135 countries already recognise Palestine, according the Palestinian Authority. Parliaments in Spain, Britain and France have voted for the recognition of Palestine. Nevertheless, all were non-binding on the governments.

Loefven revealed a $180-million aid package during the visit of Abbas to Stockholm, which is the first since 2009. The deal encompasses areas of corruption, gender equality and human rights, AFP reported.

The Swedish head of government asserted that Palestine and Israel must have readiness "to compromise." He added that Sweden's backing for Palestine signifies "setting a regional example when it comes to women's rights."

During his inaugural speech in parliament last October – after his Social Democratic Party won general elections – Loefven announced that his government will be the first EU member-state to accept Palestine as a state.

Israeli Foreign Minister Avigdor Lieberman described it as a "deplorable decision which only strengthens extremist elements and Palestinian rejectionism." For the United States, a key ally of Israel, recognising Palestine was "premature."

Both Washington and Tel Aviv have persistently argued that a Palestinian-Israeli settlement can only take place through peace talks.

The last round of negotiations, brokered by the United States, has ended with no results last April.