Israel last night flouted pressure for an independent international inquiry into the lethal assault two weeks ago on a flotilla of ships attempting to break the blockade on Gaza, announcing an internal investigation with two foreign observers.

The White House gave its approval for the Israeli formula, which will be confirmed by the Israeli cabinet today.

The inquiry into the raid, in which nine Turkish activists aboard the Mavi Marmara were killed, will be headed by a former Israeli supreme court judge, Yaakov Tirkel. The foreign observers are the former Northern Ireland first minister David Trimble and a Canadian judge, Ken Watkin. They will have no voting rights.

The inquiry falls short of a UN proposal for an international investigation, but was agreed after consultation with the US. The White House said last night that the Israeli inquiry meets the standard of "prompt, impartial, credible and transparent investigation".

Since the flotilla assault, world attention has shifted to Israel's blockade of Gaza. Pressure to ease it will intensify today when EU foreign ministers are expected to adopt a robust position. Spain, which currently holds the EU's rotating presidency, will press for a vigorous approach, with support from France, Italy and the UK. The Spanish prime minister, José Luis Zapatero, called at the weekend for a strong joint EU position on the siege.

Zapatero said his foreign minister, Miguel Ángel Moratinos, would argue at the meeting that the EU should stand up for the end of the blockade on Gaza and extend all its political and diplomatic capacity to reach that goal.

The Israeli prime minister, Binyamin Netanyahu, told his cabinet colleagues yesterday that discussions about Israel's policy towards Gaza, which have included three meetings with the Middle East Quartet envoy Tony Blair in the past eight days, were continuing. Blair, who will brief today's EU meeting, is pressing for Israel to substitute the current allowed list of items permitted to enter Gaza – all items not on the list are forbidden – for a limited list of prohibited items, with everything else permitted. The result would be greater transparency and accountability.

Netanyahu told the cabinet: "The principle guiding our policy is clear: to prevent war material from entering Gaza and to allow the entry of humanitarian aid and non-contraband goods." Despite the pressure to relax the siege, Israel is reluctant to make a dramatic move which would allow Hamas to claim a victory.

Aid agencies and the UN are also concerned that Israel will restrict any relaxation to essential humanitarian supplies which, although needed, will not help Gaza s legitimate economy to recover and regain its authority over the black market economy, which is based on goods smuggled in via tunnels from Egypt.

Phil Bloomer, Oxfam's policy director, said: [Gaza's] conventional economy is in tatters. Without a full lifting of the blockade it will continue on a downward spiral."

Israel's defence minister, Ehud Barak, yesterday called off a trip to a Paris arms show, amid reports that pro-Palestinian groups in France would seek his arrest over the flotilla deaths.

Amr Moussa, the secretary general of the Arab League, arrived in Gaza yesterday in the most high-profile visit by an Arab official since Hamas took control of the territory in June 2007, after winning elections six months earlier.

He was expected to meet the Hamas prime minister, Ismail Haniyeh, to discuss the prospects of reconciliation between Fatah, which dominates the West Bank and is the party of the Palestinian president, Mahmoud Abbas, and Hamas.

Moussa told a press conference in Rafah: "The Palestinians deserve that the world, and not just the Arab world, stand by them in the face of the siege and in the face of what is happening in the occupied territories and Jerusalem."