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The European Union has produced an explosive report recommending sanctions against Israel over its construction policies and security measures in Jerusalem, the British daily Guardian reported on its website on Friday.The leaked report describes the capital as a city gripped by the worst “polarization and violence” since the second intifada of a decade ago.The document, which is an amalgamation of recommendations prepared by European diplomats stationed in the region, accuses the government of exacerbating tensions in the city by accelerating construction in the eastern part of the capital.According to The Guardian, the city has been beset by a “vicious cycle of violence... increasingly threatening the viability of the two-state solution.” The report goes on to say that Israel’s “systematic” construction of housing in “sensitive areas” has compounded the problem.The EU report takes Israel to task for what it describes as “heavy-handed policing and punitive measures” against Arabs in the city, “including eviction and home demolitions by Israeli forces.”More significantly, the document prescribes a series of measures aimed at curbing the distribution and sale of products manufactured beyond the Green Line.The report urges restrictions against “known violent settlers and those calling for acts of violence as regards immigration regulations in EU member states.”European government are encouraged to label settler products, while warning EU businesses of the perils of engaging in trade with Israeli firms located in the territories.News of the report emerged just days after Prime Minister Benjamin Netanyahu’s election victiory.The prime minister’s reelection has brought with it a flurry of speculation regarding the international community’s anticipated response to his government’s refusal to halt construction in disputed areas as well as its stance on negotiations with the Palestinians.Jerusalem is “one of the most emotive and problematic issues,” the report says, adding, “The tensions, mistrust, and violence which have accompanied developments in the city in the course of the year have reached extremely high levels.”“These developments are increasingly threatening the viability of the two-state solution and, in turn, risk precipitating further levels of polarization and violence.”The capital recently witnessed a spate of terrorist incidents in which Arabs rammed vehicles into Jewish passersby. There was also tension surrounding access of Jews to the Temple Mount, which the EU blames on extremist agitation on both sides.“2014 has been distinguished by a number of specific, disturbing, and often violent developments,” the report states.The EU denounced “heavy-handed tactics by Israeli police” while warning that failure to address the root causes of the conflict would bring about “further escalation and extreme polarization.”“These incidents have occurred against the background of the systematic increase in settlement activity, tensions over the Haram al-Sharif [the Temple Mount] and rising levels of tensions and acts of violence on both sides,” the EU report states.A government representative told the Guardian that “this is so extremely one-sided a report that it distorts reality beyond comprehension.”