A classified report drafted by European consuls in East Jerusalem and Ramallah slams Israeli policy in East Jerusalem and recommends that the European Union take steps to strengthen the Palestinian Authority's status in the city. It also advises taking various measures to protest Israeli policy in the city, as well as sanctions against people and groups involved in "settlement activity" in and around it.

The report, a copy of which was obtained by Haaretz, is updated annually by EU representatives to the PA. This year's report was completed on November 23 and presented to EU institutions in Brussels a few days ago.

Due to the sensitivity of the document, the EU has never before published it, and in previous years Israel pressed the EU hard not to do so, for fear the publication would further undermine the European public's already negative view of Israel.

Senior Foreign Ministry officials said this year's report "left a harsh impression" in Brussels and helped Sweden promote its plan to have the EU formally recognize East Jerusalem as the capital of a Palestinian state.

The report accused both the Israeli government and the Jerusalem municipality of working deliberately to alter the city's demographic balance and sever East Jerusalem from the West Bank. It said that both bodies assist right-wing organizations, such as Ateret Cohanim and Elad, in their efforts to implement this "strategic vision," especially around the Holy Basin area. These organizations buy houses in Arab neighborhoods, and make "attempts to implant further Jewish settlements into the heart of the Muslim Quarter."

The municipality, the report continued, discriminates against the city's Arab residents with regard to building permits, health services, education, sanitation and more.

"During the past years, Palestinians have received fewer than 200 building permits per year," it said. "Based on the population growth, permits for another 1,500 housing units annually would be necessary to cover the housing needs." For instance, the EU report noted, the village of Silwan has received only 20 building permits since 1967.

Though 35 percent of Jerusalem residents are Arab, only 5 to 10 percent of the city's budget goes to Arab neighborhoods, it continued. As a result, these areas present "a sharp contrast" to "West Jerusalem neighborhoods and East Jerusalem settlements where Israelis live."

A significant portion of the report deals with archaeological excavations in Jerusalem, especially near the Temple Mount. These digs, it charged, focus mainly on Jewish history.

"Archaeology in this case has become an ideologically motivated tool of national and religious struggle carried out in a manner that modifies the identity and character of the city and threatens to undermine its stability," the report said.

On another issue, it stated: "The expansion of Israeli settlements has sparked a trend of settler violence against the Palestinian population in East Jerusalem. Such criminal actions have been witnessed by Israeli police but are not met with adequate intervention."

Israel's closure of Palestine Liberation Organization and PA institutions in the city was also blasted in the report: "The general sense of neglect felt by many East Jerusalemites and the absence of Palestinian state-sponsored institutions and secular organizations are paving the way for Islamic religious organizations to expand their influence."

The European consuls proposed several measures to strengthen the PA presence in the eastern part of the city and pressure Israel to stop harming the Arab population. They include the following:

"Ensure EU presence at Israeli court cases on house demolitions or evictions of Palestinian families" and "when there is a risk of demolition or eviction of Palestinian families."

EU "celebrations, commemorations and national or Europe day events to be held in East Jerusalem."

"EU missions with offices or residences in East Jerusalem to regularly host Palestinian officials for dinners with senior EU visitors."

"Avoid having Israeli security accompany high-ranking officials from member states when visiting the Old City or East Jerusalem."

"Refraining from meeting Israeli officials in their East Jerusalem offices."

"Information sharing on violent settlers in East Jerusalem to assess whether to grant entry to the EU."