When European Union (EU) foreign ministers meet on Monday and Tuesday next week, they are scheduled to discuss a Swedish proposal to recognize East Jerusalem as capital of a future Palestinian state.

The Swedes have also called for reopening Palestinian governmental institutions in the Israeli-controlled eastern section of the city, according to a draft of the proposal that was leaked to Israeli daily Ha'aretz.

The newspaper said the Swedish suggestion implies the EU would recognize a Palestinian state if the Palestinians decided unilaterally to declare independence.

The proposal from Stockholm, which currently holds the rotating EU presidency, is likely to be either rejected at next week's gathering or will be significantly amended between now and then, Israeli analysts said to Xinhua Wednesday.

EU officials have also indicated they do not expect this to be adopted as official Brussels' policy.

It is unclear who leaked the idea to Ha'aretz, with one EU official saying it could be in the interest of any of the 27 member states to have done so, while others suggest Israel may have been behind the advanced publication.

CRUX OF ARGUMENT

Jerusalem is the home to about 230,000 Arabs, nearly all of whom live on the eastern part of the city in an area captured by Israel during the 1967 War.

The vast majority of the international community views Israel as occupying East Jerusalem and does not recognize Israeli claim that the entire city is its capital.

Indeed, since the creation of the state in 1948, only two countries had their embassies in Jerusalem.

A small minority of legal experts argue that Israel is not an occupying force because the land never belonged to the Palestinians and the Jordanian rule over the eastern part of the city prior to 1967 was only ever recognized by two states.

However, this argument is largely dismissed by experts from around the world, including many Israelis.

The Palestinians had operated in East Jerusalem despite Israeli opposition until Ariel Sharon became Israeli prime minister some eight years ago. He closed down Orient House, which had acted as the Palestinian headquarters in Jerusalem.

Israel said at the time it closed the building and seized much of its contents because the Palestinians were using it as a base for dealing with the international community.

In Israel's eyes, the Israeli government was the sole legitimate power in Jerusalem and as such only it was entitled to conduct foreign policy from the city.

Polls suggest that there is widespread Israeli support for the country keeping control of all of Jerusalem. However, the last Israeli Prime Minister Ehud Olmert set the cat among the pigeons when he said the city would have to be divided. There has been increased support for that idea over the last 10 years, but it is still a minority view.

The current hawkish government of Benjamin Netanyahu has reversed that policy and says Jerusalem is "indivisible."

U.S. President Barack Obama's administration, backed by Europe and the Arab world, is demanding Israel end all settlement activity in East Jerusalem, including the plan publicized last month to build 900 housing units in Gilo, a Jewish neighborhood in East Jerusalem. ??

FACTORS BEHIND SWEDISH PROPOSAL

With Spain to take over the EU presidency from Sweden on Jan. 1,the Swedes wanted to have an impact on the discussion of the Israeli-Palestinian peace process and also wanted to create some positive public relations at home before the end of their term, according to Freddy Eytan, who works with the right-of-center Jerusalem Center for Public Affairs.

"The Swedes are militant when it comes to the Palestinians. Don't forget 10 percent of the population is Muslim," said Eytan, a former Israeli diplomat in Europe, believing that the Swedish government is trying to score points at home.

However, former Israeli ambassador to Sweden Zvi Mazel disagrees. He does not see it as being an exercise in domestic public relations but rather an attempt by Swedish Foreign Minister Carl Bildt to influence Middle East affairs.

Bildt is "anti-Israeli," accused Mazel, who claims the foreign minister has always held anti-Israeli views, even at times when his Moderate Party had toed a more pro-Israeli line.

"There's absolutely no reason for Sweden to come up with a proposal like this that damages the chances for success of negotiations between ourselves and the Palestinians," said Mazel, adding that the reality on the ground makes the idea of a Palestinian capital in East Jerusalem a nonstarter in the way that the Swedes are presenting it.

"NOTHING NEW"

The idea is not new, said Mazel, adding that facts on the ground have changed the reality and such suggestions will not advance European desires to be a central player in the Israeli-Palestinian peace process.

It is a view shared by Guy Harpaz, an expert on EU law and conflict resolution at the Hebrew University of Jerusalem.

"From what one can decipher from the leaked report there is nothing new here. The EU's traditional position is that all the occupied territories, including East Jerusalem, are not a part of Israel and therefore should be under Palestinian sovereignty," said Harpaz.

For him, the Swedish proposal points to the weakness or "randomness" of the rotating EU presidency. Had France or the Czech Republic been the current president, as was the case a year ago, this issue would not have been raised, said Harpaz.

Like many other Israelis, Harpaz is of the opinion that so much has changed over the years, with such a strong Jewish presence in East Jerusalem, the rather simplistic Swedish plan could never be implemented, even if it was approved by the 27 members of the EU.

Harpaz believes that in the long run the EU could well prove to be a more effective, trusted peace broker than Washington, but not by offering such ideas.

"This proposal damages Israel, but at the same time it also damages the Europeans because tomorrow they can't say they want to join in the peace process and be seen as objective," said Eytan.

However, Israel needs to take the matter very seriously, to understand the underlying message even if this cannot be implemented, added Eytan.