BRUSSELS, June 13 (Reuters) - European Union states support upgrading relations with Israel but some want the move to be linked to progress on Middle East peace, EU diplomats said before talks with Israel on Monday.

Diplomats said all EU member states supported the idea of upgrading relations with Israel in areas such as social policy, regulatory issues and access to the EU single market.

"The point of disagreement has been whether and to what extent to link closer EU ties to progress in the Middle East Peace Process," one EU diplomat said, adding that envoys would seek to overcome differences before EU foreign ministers meet their Israeli counterpart Tzipi Livni in Luxembourg.

Last year Israel proposed a range of possible upgrades in relations, including regular summits of EU and Israeli leaders, and meetings with EU sectoral ministers in addition to the current single annual session at foreign minister level.

It also wanted a high-profile joint declaration at the Luxembourg meeting on boosting ties and giving Israel greater access to EU markets, agencies and spending programmes.

EU officials said it remained unclear if Livni would attend the meeting of the EU-Israel Association Council and that this might depend on what was agreed on the EU side on Monday.

Israeli officials have said they were looking for a "political signal" favouring the upgrading of relations.

Arab League ambassadors in Brussels expressed concern this week that discussions on upgrading EU ties with Israel were going ahead "in the absence of any settlement and establishing permanent and just peace in the Middle East".

Palestinian Prime Minister Salam Fayyad wrote to Brussels last month urging the EU not to boost relations with Israel, which he accused of "flagrant disregard" of Palestinian rights by continuing to build Jewish settlements.

Diplomats say Egypt has also lobbied the EU against boosting ties with the Jewish state when there was scant progress in the Middle East peace process. (Reporting by David Brunnstrom)

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