FLORENCE, Italy (JTA) — The European Union has called on Israel and its Arab neighbors to resume peace negotiations on a variety of issues, including the future of Jerusalem.

The 15-member union met here last weekend — Italy now holds the presidency — for the first time since Benjamin Netanyahu was elected Israel's premier.

The meeting also occurred as Arab leaders met in Cairo to discuss strategy in light of Netanyahu's victory.

After the meeting, the European heads of state and government issued a joint statement spelling out what they see as the basis for any agreement in the Middle East.

"The key principles — self determination for the Palestinians, with all that it implies, and land for peace — are essential to the achievement of a just, comprehensive and durable peace," the statement said.

By including the phrase "with all that it implies" in the statement, the Europeans are a small step closer toward advocating a Palestinian state, E.U. sources said.

Peace in the Mideast is an issue "of fundamental interest for the European Union" and the peace process is the "only way" leading to security and peace for Israel, the Palestinians and neighboring countries, the statement said.

The European Union encouraged all parties "to re-engage themselves in the peace process, to respect and implement fully all the agreements already reached and to resume negotiations as soon as possible on the basis of the principles already accepted by all parties under the Madrid and Oslo frameworks," referring to the 1991 peace conference in the Spanish capital and the 1993 Israeli-Palestinian accords.

These principles, the leaders added, "cover all the issues on which the parties have agreed to negotiate, including Jerusalem, noting its importance for the parties and the international community, not least the need to respect the established rights of religious institutions."

In the statement, the union also urged Israel, Syria and Lebanon to open negotiations and called on the Jewish state to lift its closure of the territories.

Italian Prime Minister Romano Prodi, who hosted the E.U. summit, said, "We are waiting for the Israeli government to put into practice its policy before taking a stance on the changes in Israel."

Referring to the Arabs and the Israelis, French President Jacques Chirac said, "Rather than questioning each other's motives, every energy should be directed towards pursuing the peace process that has been started."

In addition, the European Union reaffirmed its condemnation of all acts of terrorism.

The union reportedly agreed on a draft convention on extradition designed to help avoid situations in which suspected terrorists wanted in one E.U. country can be set free in another.