Israeli prosecutors have charged two young Israelis with a racially-inspired attack in 2013 on dozens of Arab-owned vehicles in a village just outside Jerusalem, the justice ministry said on Monday.

During the incident in June last year, the tires of 34 cars were punctured and racist slogans were scrawled on a wall in Abu Ghosh, an Arab-Israeli village west of Jerusalem.

Once a unifying cause for generations of American Jews, Israel is now bitterly dividing Jewish communities.

Jewish organizations are withdrawing invitations to Jewish speakers or performers considered too critical of Israel, in what opponents have denounced as an ideological litmus test meant to squelch debate. Some Jewish activists have formed watchdog groups, such as Citizens Opposed to Propaganda Masquerading as Art, or COPMA, and JCC Watch, to monitor programming for perceived anti-Israel bias. They argue Jewish groups that take donations for strengthening the community shouldn't be giving a platform to Israel's critics.

A Palestinian unity deal with the Islamist Hamas movement must be supported, European Commission chief Jose Manuel Barroso told an Israeli security conference on Sunday.

His remarks came just days after a Palestinian unity government, comprised of political independents but backed by Hamas, was sworn in -- a move welcomed by the international community but rejected by Israel as a major stumbling block to peace.

Israel on Sunday signed a key European-funded scientific research program despite guidelines barring funding to settlement-linked projects, officials said.

The signing of the Horizon 2020 agreement took place at a ceremony in Jerusalem presided over by Prime Minister Benjamin Netanyahu and outgoing European Commission President Jose Manuel Barroso. 

The Palestinian foreign ministry on Sunday summoned Australia's diplomatic representative after a top judicial official said Canberra would no longer refer to annexed east Jerusalem as "occupied."

Last week, Australian attorney general George Brandis sparked Palestinian fury by saying Canberra would not use such "judgmental language" to describe an area which was the subject of negotiations.

The Israeli cabinet on Sunday approved changes in a law that could block amnesty for Palestinians imprisoned for murdering Israelis.

The amendment, which needs to be approved by parliament before passing into law, would give the courts power to prevent Israel's president from granting clemency or shortening the jail term of anyone imprisoned for murder.

Israeli President Shimon Peres and Palestinian leader Mahmoud Abbas called for peace on Sunday at an unprecedented prayer with Pope Francis on Sunday amid heightened tensions between the two sides.

Peres said peacemaking was a "duty" and a "holy mission" at the spiritual event in the Vatican Gardens, and Abbas called for a "comprehensive and just peace" that could bring stability to the Middle East.

Progressive Socialist Party leader MP Walid Jumblat has stressed that he will not pull out MP Henri Helou of the presidential race even if an agreement was reached between al-Mustaqbal movement leader MP Saad Hariri and Free Patriotic Movement chief MP Michel Aoun.

“I'm not one of those who wait for external factors. I won't pull out Henri Helou even if Hariri reaches an agreement with Aoun,” Jumblat said in an interview with The Associated Press.

A Palestinian fisherman in the Gaza Strip died on Sunday from Israeli gunshot wounds sustained last month, an official in the outgoing Hamas-run health ministry said.

"Fisherman Imad Shukri Salem, 52, died this morning from wounds he sustained two weeks ago," spokesman Ashraf al-Qudra told AFP, saying troops on a naval vessel fired at him while he was fishing.

Pope Francis on Sunday hosts an unprecedented peace prayer meeting with Israeli President Shimon Peres and Palestinian President Mahmud Abbas in a symbolic gesture to foster dialogue but unlikely to have any immediate effect.

Tensions are running high between the two sides following the formation of a new Palestinian unity government backed by the Islamist group Hamas and the announcement of Israeli plans for building 3,200 new settler homes.