TEL AVIV //The European Union should treat East Jerusalem as the de facto capital of the future Palestinian state in protest at Israeli settlement policies, EU diplomats have said in a leaked report.
The consuls-general in Jerusalem and Ramallah also recommended that the EU take more concrete steps against Israel's expansion of Jewish homes in East Jerusalem. They could include advancing the growing European consumer boycott of settlement products and services, including staying at Jewish-owned hotels in East Jerusalem, the report said.
East Jerusalem is the most explosive issue in the Israeli-Palestinian conflict. The report is likely to anger Israel, and bolster the Palestinians' case for their future capital.
It also comes at an especially sensitive time, with the conflict over East Jerusalem serving as a key reason for the stalemate in direct talks between Israel and the Palestinians.
Israel in September refused to extend the 10-month moratorium on settlement construction that expired at the end of that month, partly because it did not want the building freeze to include East Jerusalem.
That rejection spurred the Palestinians to refuse to return to the US-mediated, face-to-face negotiations that had started just three weeks earlier.
In an escalation of the dispute over East Jerusalem, Benjamin Netanyahu, the Israeli prime minister, yesterday dismissed US and European condemnation of plans to build more Jewish homes at a controversial hotel complex in the mostly-Arab Sheikh Jarrah neighbourhood.
On Sunday, workmen and earth-moving equipment demolished a part of the Shepherd Hotel to begin making way for the construction of as many as 70 apartments for Jews.
Palestinians have contested a pro-settler American Jew's 1985 purchase of the hotel, which was built in the 1930s for a prominent Arab family and confiscated by Israel after the country took over East Jerusalem in the 1967 Arab-Israeli war. Mr Netanyahu, in a statement issued by his office, defended the property's acquisition as legal and added: "There should be no expectation that the state of Israel will impose a ban on Jews purchasing private property in Jerusalem."
He also insisted that the government was not involved in the hotel's building plans, which he said were being conducted by "private individuals".
Nevertheless, the leaked EU report reflects increasing impatience with Israeli policies.
The document recommended that European politicians and officials refuse to visit Israeli governmental offices or settler-owned archaeological sites in East Jerusalem, and reject Israeli security services in the area.
It also suggested possibly preventing the entrance into the EU of settlers known for violent behaviour towards Palestinians, and working to re-open official Palestinian institutions in East Jerusalem, which were forcibly shut down by Israel in 2001.
The report also advises that European officials be present at Israeli demolitions of Palestinian homes in East Jerusalem and at court proceedings involving Israeli plans to raze more Palestinian houses or conduct arrests of Palestinian activists carrying out nonviolent protests.
Such recommendations are likely to boost the Palestinian campaign to gain worldwide recognition for the establishment of a sovereign Palestinian state without waiting to reach a peace pact with Israel.
Yesterday, the Palestinian foreign minister, Riad Malki, said that he will seek recognition from the United Nations for a Palestinian state in September and continue lobbying for international backing of their campaign until then, according to the Associated Press.
On Friday, Chile became the fifth South American country to recognise the state of Palestine within the borders of the territory Israel captured in the 1967 Arab-Israeli War – namely, the West Bank, East Jerusalem and Gaza Strip. Palestinian negotiators have said they had also submitted a request for such recognition from the EU but have not yet received an official response.
Garnering the support of the UN General Assembly for such recognition seems possible, the Associated Press has reported.
However, the US, Israel's most powerful ally, is likely to torpedo any vote at the UN's top body, the Security Council, on granting such recognition.
Nevertheless, the Palestinians hope that their campaign will help pressure Israel to make more concessions towards heeding their demand for an independent state within the pre-1967 borders.
The Palestinians' planned request in September will also coincide with the date that had been set last year by Barack Obama, the US president, as the target for reaching a negotiated peace deal. With talks stalled, that aim now appears increasingly implausible.