The European Union will step up efforts to pressure Israel and the Palestinians into an agreement in 2013, an internal Foreign Ministry document predicts.

The report, which was compiled following last month’s UN vote to recognize Palestine as a nonmember observer state and subsequent European protests over Israel’s approval of new construction in East Jerusalem and the West Bank, states that the Europeans may try to promote the establishment of an actual Palestinian state independent of negotiations with Israel.

Foreign Ministry officials this week began discussing an evaluation to be presented to the new government after the January 22 election. The feeling in the ministry is that Israel’s status has deteriorated badly over the past four years, particularly in the European Union. Ministry officials attribute the decline to the lack of progress in the peace process and Israel’s response to the Palestinians’ UN bid, particularly the wave of settlement construction.

A senior Israeli official said the ministry’s report predicts that in 2013, Israel will face heavy pressure from the European Union to show progress on the Palestinian issue. The report states that the EU has become disenchanted with the diplomatic process in its traditional format – direct talks between Israelis and Palestinians – because they doubt its ability to lead to a solution.

The official said the report warns of a scenario in which the EU would try to force a solution on Israel and the Palestinians through means other than direct talks. The Foreign Ministry noted a significant change in the wording of the EU foreign ministers’ latest resolution compared to those of the past. This time, the idea that the best way forward is direct negotiations was absent. A senior ministry official said this is a hint that the EU is looking for ways to promote a two-state solution even if neither side shows a desire for it.

“A growing understanding can be seen in the EU of the ineffectiveness of the current process,” the report states. “This understanding is accompanied by repeated calls to find new channels of progress … The emphasis from their perspective is not on actual direct negotiations between Israel and the Palestinians, but rather on the essential need to move ahead quickly to a permanent-status solution, because the EU recognizes that without a solution, things could go downhill on the ground.”

A senior European diplomat confirmed to Haaretz that “The EU thinks there needs to be a peace process in a new format to lead to progress in 2013. We think international parameters should be formulated for the end of the conflict. We will no longer agree that the two sides should sit alone in a room and we should say yes to everything they do.”

The Foreign Ministry believes that Britain and France want to dramatically increase their involvement not only in future negotiations, but in what is happening on the ground in the West Bank. This stems from concern in Europe that continued construction in the settlements after the Israeli election could prevent the establishment of a Palestinian state, which would harm the interests of the entire EU.

“European attempts to strengthen the Palestinians’ hold over the areas of their future state by continuing to challenge Israeli control on the ground in Areas B and C will continue,” the report states.

In area C, which constitutes a majority of the West Bank, Israel has both civilian and military control. In Area B, Israel has security control while the Palestinian Authority has civilian control.

The ministry report also notes that despite consensus on the urgent need to bring about a solution of the Israeli-Palestinian conflict, the European Union’s 27 member states are not of one mind as to how to bring the parties back to the table. The debate revolves around how much to pressure Israel and whether to impose sanctions.

According to the report, European action against the settlements is gathering steam: Israel can expect continued European censure over settlements, as well as action to limit the sale of products from the settlements in the EU. However, no harsher steps are expected at this time.

“At the moment, it seems that those in the EU who support restraint toward Israel have the upper hand,” the report says. “But it must be remembered that the motives for this are not necessarily an understanding of Israel’s political exigencies … European restraint toward Israel is conditioned on Israel contributing to the establishment of a Palestinian state.”

Nevertheless, the report also notes positive elements in the latest EU decision. For example, for the first time, the EU foreign ministers adopted Israel’s position that an end to mutual claims is an essential part of any peace agreement. The foreign ministers’ strongly-worded statements against terror as a political tool and in favor of ending weapons smuggling to Gaza were meant to express stronger support than in the past for Israel’s security needs, the report adds.