Israel's decision to push ahead with settlement expansion in East Jerusalem in defiance of international community opinion generated a rebuke from the EU on Wednesday (18 November).
"The Presidency of the European Union is dismayed by the recent decision on the expansion of the settlement of Gilo," said the Swedish EU presidency in a statement.
"The presidency recalls that settlement activities, house demolitions and evictions in East Jerusalem are illegal under international law."
On Tuesday, after the Palestinian Authority announced it was preparing to unilaterally declare independence, the Jerusalem municipal planning committee approved a construction scheme that would see some 900 housing units in Gilo, claimed by Israel as a Jerusalem neighbourhood but described by the United Nations as an Israeli settlement in East Jerusalem.
Around 40,000 Israelis live in Gilo, which was built on West Bank land Israel captured in the 1967 Six-Day War and subsequently annexed as part of Jerusalem.
The EU said that the move endangers the chances of achieving peace between the two belligerents, both of whom claim Jerusalem as their capital.
"Such activities also prejudge the outcome of final status negotiations and threaten the viability of a two-state solution. The presidency recalls that the European Union has never recognised the annexation of East Jerusalem in 1967 nor the subsequent 1980 basic law," the statement continued, referring to the Israeli bill that approved the land grab, a law that the UN Security Council subsequently declared to be "null and void".
"Actions taken by the Israeli government contravene repeated calls by the international community, including the Quartet, and run counter to the creation of an atmosphere conducive to achieving a viable and credible solution to the conflict between Israelis and Palestinians."
The bloc also expressed its desire that Jerusalem be shared between the two sides in any future deal.
"If there is to be genuine peace, a way must be found to resolve the status of Jerusalem as the future capital of two states."
New EU language on Jerusalem?
Language referring to Jerusalem in this way – as the capital of two states – by the Swedish presidency in recent weeks has produced a flurry of diplomatic activity from Israel, which is worried that Stockholm is trying to establish a new European phraseology that presupposes what the final status of the ancient city will be in any peace agreement.
Such language, notably in official EU documents, in speeches by Sweden's representatives at a recent the United Nations General Assembly meeting and during discussions in Geneva, and in official announcements about the peace process have disquieted the Israeli foreign ministry, which is trying to stop this from becoming a European norm.
The ministry instructed missions in EU member states to take action against the Swedish move, according to centre-left Israeli daily Haaretz, quoting a senior Israeli official.
The embassies were told to find out whether the language referring to Jerusalem was fully backed by the member states or was an 'own-initiative' move by the Swedish EU presidency. According to the paper, referring to a foreign ministry document it had seen, the response had been that some EU countries said that the phraseology was being adopted independently of common agreement, while Swedish officials maintained that statements on Jerusalem reflected the bloc's position and are supported by all states.
Israeli missions were then told to protest the issue in all 27 member states.
An Israeli diplomat told this website: "It is strange that this language on Jerusalem seems to have just slipped in there."
France, for its part, seems to be taking a softer line than the Swedish presidency.
During a visit to Jaffa on Wednesday, French foreign minister Bernard Kouchner said that the settlement expansion was did not threaten the peace process. Speaking at the French ambassador's residence, the minister said that he had spoken with Israeli Prime Minister Benjamin Netanyahu, who had assured him that the move was still only in the planning stages, which assuaged Mr Kouchner's concerns.
At the same time, the French cabinet member warned "The coming days are a test for the Israeli government," when speaking to opposition leader Tzipi Livni.
The issue of Jerusalem is one of the most intractable issues in the Israel-Palestine conflict. While both Israelis and Palestinians claim Jerusalem as their capital, most countries maintain their embassies in Tel Aviv while the occupied territories are administered by the Palestinian Authority in the town of Ramallah.