European Union foreign ministers discussed a proposal Tuesday for the 27-nation bloc to recognize Jerusalem as the capital of both Israel and a future Palestinian state.
Israel has strongly objected to a Swedish draft resolution that does not recognize Israel's claims to the eastern part of the city. Israel's Foreign Ministry warned the move would damage the EU's ability to be a Mideast mediator.
"The EU will not recognize any changes to the pre-1967 borders, including with regard to Jerusalem," said a draft EU ministerial resolution seen by The Associated Press. It referred to the Mideast war in which Israeli forces captured east Jerusalem from the Jordanian army.
The document also called for the establishment of a Palestinian state comprising the West Bank, Gaza and Jerusalem. "If there is to be (peace) a way has to be found to resolve the status of Jerusalem as the capital of two states," it said.
The competing claims to east Jerusalem remain the most intractable issue in the Israeli-Palestinian conflict. Last week, Israel sternly warned the EU against adopting new language that endorses east Jerusalem as the capital of a Palestinian state.
Most EU ministers appeared supportive of the latest draft, although some said the declaration should not antagonize either party in the dispute at the risk of undermining efforts to restart peace talks.
"I don't really understand why Israel does not accept that Palestine consists of the West Bank, Gaza and east Jerusalem," Luxembourg's Foreign Minister Jean Asselborn told journalists. "The Israelis have a right to live in Israel, the Palestinians have a right to live in Palestine."
Finish Foreign Minister Alexander Stubb said the EU must affirm its stand on the status of Jerusalem and insist that Israel must not resume settlement building.
"The EU has very strong principles and we have to stick to those principles," Stubb said. "I think the negotiations, the peace process must simply start and this is a way forward."
The EU foreign ministers meeting is intended to pave the way for the regular, year-end summit on Thursday and Friday.
In response Israeli President Shimon Peres said the debate on the Swedish proposal to declare east Jerusalem the capital of a future Palestinian state would "create confusion".
He added that it was an attempt at replacing the UN. "Any controversial subject should be sorted out by talks between the sides," Peres said. "Those who try to impose a reality will find that this doesn't work."
Ronen Medzini contributed to this report