ISRAEL'S construction in east Jerusalem is a deliberate strategy to prevent the city from becoming capital of two states, an internal EU report has found.
In its Jerusalem Report 2012, a copy of which was seen by AFP, the European Union said Jewish settlement construction posed "the biggest single threat to the two-state solution".
And it outlined a series of recommendations urging member states to halt or avoid any financial investment or transactions which could directly or indirectly feed into Israel's settlement-building enterprise in an effective call for economic sanctions.
Written by the EU heads of mission in Jerusalem and Ramallah, the strongly-worded report described Israel's settlement construction in east Jerusalem as "systematic, deliberate and provocative" accusing the Jewish state of making deliberate political choices that threaten to render the two-state solution impossible.
An Israel spokesman dismissed the report, saying it showed the Europeans had failed in their diplomatic mission.
"A diplomat's mission is to build bridges and not to encourage confrontation," foreign ministry spokesman Yigal Palmor told AFP.
"These consuls have failed in their diplomatic mission."
Relations between Israel and the EU have been unusually tense in recent months, with Europe voicing anger over a swathe of Israeli plans for more than 5000 new settler homes in east Jerusalem.
In the 15-page report, EU diplomats flagged construction on the southern flank of east Jerusalem -- in Har Homa, Gilo and Givat HaMatos -- as being the "most significant and problematic" saying that if it continued unabated, it would likely cut the area off from Bethlehem by the end of the year.
"The construction of these three settlements is part of a political strategy aiming at making it impossible for Jerusalem to become the capital of two states," it warned.
"If the current pace of settlement activity on Jerusalem's southern flank persists, an effective buffer between east Jerusalem and Bethlehem may be in place by the end of 2013, thus making the realisation of a viable two-state solution inordinately more difficult, if not impossible."
In 2012, tenders were issued for 2366 new units which was "more than twice" the total number issued over the preceding three years, the report said, noting most were for construction in Har Homa.
It also highlighted Israel's plans to build 3426 units in E1 - a deeply sensitive strip of West Bank land east of Jerusalem, saying if implemented, it would threaten "2300 Bedouin with forcible transfer" and effectively cut the West Bank in half.
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