Britain and Germany are calling for more decisive measures to stop Colonel Gaddafi being able to use his oil revenues to finance attacks on his own people.
They also want EU foreign ministers meeting today to back moves to strip the Libyan leader of the international immunity he enjoys as a head of state.
The proposals come in a joint letter by William Hague and his German counterpart, Guido Westerwelle, as they try to increase the diplomatic pressure on Colonel Gaddafi to step down.
In the letter addressed to Baroness Ashton of Upholland, who is chairing today’s meeting of all 27 EU foreign ministers in Brussels, the pair also call for an end to all co-operation with the Gaddafi regime. They go on to set out a vision for the EU’s policy with its southern neighbours that uses European cash to reward democratic transition.
In a plan for the next steps over Libya, the pair urge the foreign ministers to agree a declaration that “the EU and its member states will not work or co-operate with Gaddafi and that he has to step aside to allow for a true democratic transformation of the country”.
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They then call for tougher sanctions, saying that the measures already taken to ban visas and freeze assets for Colonel Gaddafi and 25 of his close associates should be extended to others in the regime.
They add that the EU “could support the suspension of Gaddafi’s sovereign immunity” and consider steps to “ensure that Gaddafi is not able to use oil revenues to finance his military campaign”.
A British official added that this could mean the setting up of an escrow account for oil revenues that could eventually channel money to emerging leaders in the east of Libya.
Mr Hague and Mr Westerwelle also call for a significant increase in humanitarian aid and an EU fact-finding mission to eastern Libya.
On the wider region, they then add: “Our vision is a comprehensive partnership of equals between the peoples of Europe and its neighbourhood, underpinned by deeper and wider economic integration.
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“We can achieve this by a custom-made co-operation of the European Union with those that want this partnership and see in it as an opportunity to support the changes they want themselves.”