European Union envoys in the Middle East have urged Brussels to treat East Jerusalem as the future capital of a Palestinian state and severely criticised Israeli polices there, according to a leaked report.
In the document, the heads of 25 European missions in Jerusalem and Ramallah recommend a range of actions to be taken in order to discourage Israel from continuing to "undermine" the status of the disputed part of the city.
Proposals in the document, a copy of which has been obtained by Al Jazeera, include dispatching EU observers to the scene of Israeli demolitions of Palestinian homes in East Jerusalem, and a possible ban on EU entry for Israeli settlers deemed to have forcefully moved into Palestinian areas.
Speaking on condition of anonymity, EU diplomats said most of the recommendations in the report were not new but it was the first time they had been leaked.
An Israeli official said: "We are talking about an internal EU document that they have sent to Brussels, and we have no idea if Brussels is going to go with the idea or not."
The leaked report highlights problems faced by Palestinians in East Jerusalem, including the difficulty of obtaining Israeli permission to build accommodation and "restrictive measures" governing their residency status.
These measures include Palestinians being required to regularly prove that Jerusalem is central to their day-to-day life. Those who fail to do so risk losing their Israel-issued permit to live in the city.
The report also criticises Israel’s separation wall and associated permit regime, saying that these have a "serious humanitarian, social and economic impact on Palestinian life".
It says the wall often means that Palestinians must pass through checkposts to use basic health or education facilities to which they are entitled.
It gives the example of the planned construction of a wall around the village of Al Walaja, which, once completed, would "cut off farmers from much of their agricultural land".
"If current trends are not stopped as a matter of urgency, the prospect of East Jerusalem as the future capital of a Palestinian state becomes increasingly unlikely and unworkable," the document said, citing Israeli settlement on occupied land in and around Jerusalem.
"This, in turn, seriously endangers the chances of a sustainable peace on the basis of two states, with Jerusalem as their future capital," the envoys said.
Palestinians want East Jerusalem, which Israel occupied following the 1967 Six-Day War, to be the capital of a Palestinian state.
Israel regards all of Jerusalem as its capital, despite the fact that under international law the area is occupied territory.
Israel, the document said, was "systematically undermining the Palestinian presence" in the city and there should be "a more active and visible implementation of EU policy on East Jerusalem".
As part of this policy, the envoys recommend that EU officials be present "when there is a risk of demolitions or evictions of Palestinian families" and "at Israeli court cases on house demolitions or evictions of Palestinian families".
It also recommends that the EU "intervene" if Palestinians are "arrested or intimidated by Israeli authorities" while engaged in "peaceful cultural, social or political activities".
Further, it says that EU officials should refrain from meeting Israeli officials in their East Jerusalem offices.
It suggests that EU events be held in collaboration with Palestinian institutions in East Jerusalem, including arranging visits by high-ranking EU officials.
The report also makes recommendations regarding encouraging interfaith dialogue and encouraging "Arab countries to acknowledge the multicultural dimension of Jerusalem, including its Jewish and Christian heritage".
It also suggests stricter controls to prevent the export of Israeli products produced in East Jerusalem to the EU.
Israel drew US and EU criticism on Sunday after bulldozers demolished a derelict East Jerusalem hotel to make room for 20 new homes for Israelis in a privately funded settlement project.
Israel shrugged off international condemnation of the move, with Binyamin Netanyahu, the prime minister, saying that the operation was carried out legally by private Israeli citizens who owned the land in question.
According to official documents, the hotel was owned by al-Quds Mufti, Haj Amin al-Hussaini, who was deported by the British rule in 1937. He later died in Lebanon in 1974.
The hotel was declared "absentee property" by Israel after it captured and annexed East Jerusalem.
Ban Ki-moon, the UN secretary-general, in a statement on Monday, deplored the Israeli demolition "in the heart of a Palestinian neighbourhood, which only serves to heighten tensions".
"It is deeply regrettable that growing international concern at unilateral expansion of illegal Israeli settlements is not being heeded," the UN statement said.
"Such actions seriously prejudice the possibility of a negotiated solution to the Israeli-Palestinian conflict."
(Al Jazeera and Agencies)