Deposed Hamas Prime Minister Ismail Haneya said on Wednesday the European Union (EU)'s call for negotiations on Jerusalem status was an "incomplete step."

"This is a half step," Haneya told reporters in Gaza, adding that "this step must be completed and Jerusalem must be upheld as the capital for the (future) Palestinian state."

"The Palestinian people are still expecting a more advanced position from the EU regarding Jerusalem and the Palestinian rights," Haneya added.

EU foreign ministers on Tuesday urged Israel to share Jerusalem with the Palestinians as part of a Middle East peace agreement and make the holy city to be the capital of both the Jewish state and a future Palestinian state.

Hamas immediately rejected the proposal, saying it was "below the level and doesn't meet the Palestinian people's hopes."

But the Palestinian National Authority (PNA) took a different stand.

Saeb Erekat, the chief Palestinian peace negotiator, said on Wednesday that the EU declaration "was important and could be built upon to develop collective European acceptance to demarking the Palestinian state's borders in the Security Council."

The PNA seeks UN recognition of a future state. Peace talks between Israel and the PNA came to a stop a year ago due to the settlement activities in the West Bank and East Jerusalem.

The EU foreign ministers said in Brussels Tuesday that they were seriously concerned about the suspension of the Israeli-Palestinian negotiations.

The EU calls for negotiations "that will lead, within an agreed time-frame, to a two-state solution with the state of Israel and an independent, democratic, contiguous and viable state of Palestine, living side by side in peace and security," a statement by the EU council said.

The EU statement stressed that Jerusalem must be shared between Israel and the Palestinians who want the eastern part of the holy city as their capital.

"If there is to be a genuine peace, a way must be found through negotiations to resolve the status of Jerusalem as the future capital of two states," the statement said.