Israel sternly warned the European Union on Tuesday against recognizing east Jerusalem as the Palestinian capital, saying such a move would damage Europe's credibility as a Mideast mediator.

The warning came as Jewish settlers in the West Bank confronted government inspectors sent to enforce a ban on new construction on territory Palestinians claim for a future state. No major violence was reported, but the images could boost the efforts of conservative Israeli Prime Minister Benjamin Netanyahu to portray himself as amenable to international demands for curtailing settlement construction.

Sweden, the current EU president, is floating an initiative to recognize east Jerusalem as the Palestinian capital. The Israeli daily Haaretz reported Tuesday that Sweden will seek approval at an EU meeting in Brussels next week.

In Stockholm, officials declined to confirm the proposal. But diplomats in Brussels said privately that Sweden has put the issue up for a debate by the EU governments.

The text, quoted by Haaretz, refers to a "two-state solution with an independent, democratic, contiguous and viable state of Palestine, comprising the West Bank and Gaza and with east Jerusalem as its capital, living side by side in peace and security with the state of Israel."

An explicit European endorsement of their claims to east Jerusalem would be a diplomatic victory for the Palestinians, backing the demand by Palestinian President Mahmoud Abbas that an Israeli construction freeze in the West Bank must include east Jerusalem.

It also would mark a significant break with tradition. The Europeans have long said Jerusalem should be a shared capital, but that Israel and the Palestinians must jointly agree on that.

The dispute over east Jerusalem — home to Jewish, Muslim and Christian holy sites — is the most intractable issue in the Israeli-Palestinian conflict.

Israel captured the area in the 1967 Mideast war, immediately annexed it and claims all of Jerusalem as its eternal capital. But the annexation has not been internationally recognized, and the Palestinians want to make east Jerusalem the capital of a future state.

The EU wording would also support the Palestinian claim for a state based on the 1967 border between Israel and the West Bank.

Although the proposal is unlikely to pass, Israel's Foreign Ministry issued a strongly worded statement urging the EU not to proceed.

"The move led by Sweden damages the ability of the European Union to take a role and be a significant factor in negotiations between Israel and the Palestinians," the statement said.

A Dutch diplomat called an EU decision on east Jerusalem "hard to imagine." Major decisions require unanimous approval, and there are divisions among the 27 members over the Jerusalem issue. Other diplomats said the wording of any final proposal would likely change.

Palestinian presidential adviser Rafik Husseini accused Israel of trying to sabotage the Palestinian diplomatic efforts. "They are trying to make sure it never happens," he said.

The Palestinians have refused to restart peace talks, which broke down nearly a year ago, until Israel halts construction in Jewish settlements in the West Bank and east Jerusalem.

Settlers have promised stiff resistance to the building freeze, and on Tuesday, Israeli radio stations reported unrest in at least four settlements where inspectors tried to enforce the government order. There were no reports of injuries, but the reports said inspectors were blocked from entering the settlements.

The Palestinians have called Netanyahu's offer of a 10-month halt to new West Bank housing insufficient because it excludes east Jerusalem, as well as 3,000 homes already being built in the West Bank.

Even so, Netanyahu, a traditional ally of the settlers, claims he has made a painful and unprecedented gesture to get peace efforts back on track — and Tuesday's unrest could help back his position.

Some 300,000 Jewish settlers live in the West Bank, in addition to 180,000 Israeli Jews living in east Jerusalem.

In other unrest, a Jewish family took over a house in an Arab neighborhood of east Jerusalem, sparking a protest by rock-throwing Palestinians and a few Israeli and foreign activists who joined them, police said. One of the family members was lightly injured in the head when a protester hit him with a metal bar, and police arrested five people. Both sides claim ownership of the building.