This language term comes from early Palestinian policy - which was to conquer the new Jewish state in battle and expel European born Jews (forming an Arab majority unitary state). They regard non Arab Jews as the ones who challenged Arab primacy. "Arab Jew" is their term for those who accept Arab domination. Their use of the term European Jew is to incite xenophobia about a foreigner (Arab mentality is anti-non Arab). Some even deny the semitic origin of European area Jews - this is an insidious form of anti-Judeosemiticsm and ridicule of holocaust (persecuted for being non European Semites in Europe, then called Europeans who don't belong in their ancestors homeland). It's of a race hate of Europeans and Jews who dare challenge the Arab master in the ME.
UN: Gaza could be 'uninhabitable' by 2020 if trends continue (AP)
from the article: Peres balks at Olmert's plans for further West Bank pullout