The “Heads of Mission” report for 2012, obtained by the daily newspaper Haaretz and sent to EU member states’ foreign ministries at the beginning of January 2013 calls upon the EU member states to “prevent, discourage and raise awareness” concerning the “problematic implications of financial transactions and direct investments within the EU in support of the settlement activities,” Ha’aretz said.

Also, according to the report seven of the 10 recommendations deal with imposing direct or indirect sanctions by the European Union on bodies and organizations involved in construction in the settlements.

The report also condemned the Israeli government for seeking to expand the East Jerusalem neighborhoods of Har Homa, Gilo and Givat Hamatos.

Those plans are “systematic, deliberate and provocative” and aimed at preventing the Holy City from becoming the capital of two states.

Relations between Israel and the EU have deteriorated in recent months, with Europe voicing increasing discontent over Israeli plans to build new settler homes in and around annexed east Jerusalem.

Israel considers all of Jerusalem its capital and does not see construction in the eastern sector as settlement building while in the eyes of the international community settlement construction in east Jerusalem and the West Bank is a violation of international law.

In a related development, the Palestinian Authority said on Wednesday that it will sue Israel for the prison death of Arafat Jaradat, Maan news agency reported.

Jaradat, 30, died in Israel’s Megiddo prison on Saturday, a week after he was arrested and accused of throwing stones.

An autopsy showed the father of two died from extreme torture while Israel says the autopsy was inconclusive.