Israeli officials on Tuesday slammed an EU directive forbidding all 28 EU member states from dealing with Jewish communities located beyond the 1949 Armistice lines, including eastern Jerusalem.
The binding directive, due to be published on Friday by the European Commission and take effect from 2014, forbids any funding, cooperation, awarding of scholarships, research funds or prizes to institutions or people residing in the West Bank, East Jerusalem and the Golan Heights. It requires ‘’a clear distinction to be made in all future signed agreements, between Israel and the entities in the West Bank, east Jerusalem, the Gaza Strip and the Golan Heights."
A high-ranking official, who requested anonymity, described the European Union's move as a disproportionate "attack" on Israel, while a senior source in the Foreign Ministry said called the new EU decision as ‘’dramatic and a true earthquake.”
"When it comes to disputed territories, the Europeans prefer to attack a small country like Israel instead of taking on more powerful states, because they're afraid of retaliation," the official said.
Israel was "only informed of the directive at the last moment," he added.
"This is the first time in which a explicit and formal instruction like this is issued. Until now, there were silent understandings and agreements that the EU does not work beyond the Green Line” – as the 1949 Armistice Line is known – “but this is an official and binding prohibition.”
Israeli Deputy Foreign Minister Zeev Elkin told Israel’s army radio the Europeans had made a "mistake" and that the directive would undermine any return to peace talks with the Palestinians.
"It's a very worrying initiative launched at a bad time, because it only reinforces the Palestinians' refusal to restart negotiations," he said. ‘’This will make it difficult for the state of Israel to conduct contacts with the EU regarding cooperation agreements.’’
He said "We are not ready to sign on this clause in our agreements with the European Union," but admitted that the refusal could "halt all cooperation in economics... and cause severe damage to Israel."
The President of the Federation of Industrialists, Tzvika Oren, said Tuesday that he was “sorry to learn about the European Union's intention, to mix politics and economics.”
"The widespread network of economic connections between Israel and the EU states can be an instrument for advancing relations between us and the nations of the region, and the Palestinian Authority in particular,” he stated.
"Therefore, I call upon the EU Commission to act positively, to advance economic cooperation between Israel and the Palestinian Authority, which will help improve diplomatic relations in the region.
"I therefore call upon the European Union to refrain from creating blockages and taking steps that are likely to sabotage future agreements. Instead, we should concentrate on advancing a policy of dialogue and cooperation between Israel and the EU.”
A leader of the Yesha Council -- an umbrella group of municipal councils in Jewish settlements in the West Bank -- strongly criticized the EU.
“The one-sided and discriminatory EU directive means Europe has effectively decided to abandon any involvement it had in the Middle East peace process,” Dani Dayan said in a statement.
“By aligning itself with the most extreme Palestinian demands, the EU can no longer be perceived as a neutral or objective,” he added.
Israeli Defense Minister Moshe Ya'alon said that the government will continue with its current policy in the West Bank. "It is not new that many countries in the world refer to Judea and Samaria as occupied territory, and according to this they act. We have our policies and will continue to abide by and according to our interests," he said.
Regarding reports of John Kerry's expected new visit to the region, Ya'alon said: "I am more than aware of Kerry's efforts; he has been hard at work for some months now to bring us and the Palestinians to the negotiation table.
"At this point the Palestinians are refusing to talk until we fulfill certain preconditions. We have said so clearly – we are willing to return to negotiations immediately and without preconditions; we are willing to talk long and hard about everything – but at this point the Palestinians refuse, and hence (Kerry's) efforts have yet to bare fruit."
Israeli Finance Minister Yair Lapid declared : ‘’This decision is another in a long line of decisions that isolate Israel. Time is not in out favor, and every day that Israel does not engage in peace talks is a day in which our international status sustains more damage."
He added, "this is a miserable decision, which was made in very bad timing and thus sabotages the efforts that US Secretary of State John Kerry is putting into bringing the sides back to the negotiation table.’’
‘’This decision signals to the Palestinians that there is no economic or international price to be paid for their continued refusal to resume negotiation; it leads them to believe that Israel will succumb to international and economic pressure."
Lapid promised not to stop at words and take action, claiming that he intends to "appeal to our friends in the European Union and explain to them that their decision damages the very end they are attempting to achieve, as it pushes peace farther away instead of bringing it closer."
Opposition Labor leader Shellyu Yachimovich also responded to the EU's decision to ban agreements with Israel which include settlements, saying that "the increasing diplomatic isolation is causing harm to the country and the market, and poses a strategic threat no less severe than the one posed by the sophisticated weapons aimed at us.
"Nevertheless," Yachimovich added, "it is very unfortunate that instead of supporting and helping the Americans' efforts to resume negotiation, the European Union focuses on sanctions and bans."
The European Union is the first trading partner for Israel with total trade amounting to approximately €29.4 billion ($38.5 billion) in 2011. The EU is Israel's major source of imports (34.5 percent of the import market) and the second largest market for exports (26.1% of the export market), behind the United States.