Malnutrition rates in the Gaza Strip and parts of the West Bank are as bad as those in sub-Saharan Africa, MPs said yesterday. They warned that the Israeli security fence around the occupied territories was "destroying the Palestinian economy and creating widespread poverty".

The all-party Commons International Development Committee called for European Union trade sanctions to be imposed on Israel until it allowed the free export of goods from the West Bank and Gaza.

The committee's report also condemned suicide bombings as "morally abhorrent" and "a catastrophic tactic that has done great harm to the Palestinian cause".

MPs called on the Palestinian Authority to be more vocal in its condemnation of attacks. "Israel's security measures are preventing Palestinians from accessing services as well as inhibiting humanitarian and development work," the MPs said. "They are destroying the Palestinian economy and creating widespread poverty."

The MPs, who carried out a fact-finding trip to Israel as part of their six-month inquiry, criticised corruption and mismanagement by the Palestinian Authority, but also condemned the actions of the Israeli government.

They said they understood why the Israeli government had decided to build its 425-mile security fence, but added that it had displaced Palestinian homes, destroyed farms and severely disrupted trade.

Tony Baldry, the Conservative chairman of the committee, said: "Our report is a balanced assessment of the humanitarian situation in the occupied Palestinian territories. It shows that Israel's security policy is having a marked impact on everyday life.

"Key measures, such as the construction of a security barrier, may bring the mirage of immediate security to Israelis, but the level of despair felt by ordinary Palestinians at being denied an ordinary life can only increase the supply of suicide bombers. Nor is it likely to elicit any concessions from the Palestinian leaders."

MPs said that the Israeli government and many ordinary Israelis regarded all Palestinians as potential suicide bombers, but said that "it is tragically the case that for a number of Palestinians, the harder the Israeli Defence Force bears down on them the more they feel obliged to resist by force of arms".

The MPs said that the barrier "destroyed the viability of a Palestinian state" and risked having an irreversible effect on the Palestinian people.

They said: "Rates of malnutrition in Gaza and parts of the West Bank are as bad as anything one would find in sub-Saharan Africa. The Palestinian economy has all but collapsed. Unemployment rates are in the region of 60 to 70 per cent. "The EU should not shy away from using economic pressure to gain political leverage with Israel."

The report said that Palestinian farmers had land confiscated, crops damaged and were "plagued" by problems in getting goods to market.

MPs condemned the Israeli government for preventing the free export of goods from the West Bank and Gaza, and urged the EU to suspend Israel's preferential tariff rates until they allow Palestinians free access to European markets. They said: "It is hard to avoid the conclusion that there is a deliberate Israeli strategy of putting the lives of ordinary Palestinians under stress as part of a strategy to bring the population under heel.

The report said movement restrictions on the Palestinians were justified by Israel as security measures, but warned that "in reality they have been a mechanism to put pressure on the Palestinians by crippling the economy".