EU think tank proposes banking restrictions against Israel

A paper by an influential European think tank published Wednesday called for the European Union to restrict its dealings with Israeli banks as a way to combat continued Israeli control of the West Bank.

The paper, published by the European Council on Foreign Relations, says that by dealing with Israeli banks, the EU could be contravening its own guidelines.

The guidelines would prohibit the EU and member states from funding loans to entities in Israeli settlements. Given that the British government has a controlling stake in some banks, the guidelines would prohibit those banks from dealing with Israeli banks with branches in the settlements.

The paper, titled “EU Differentiation and Israeli Settlements,” also said Israelis should not be able to use properties in the settlements as collateral for European loans. The paper also questioned whether there should be a tax exemption for European charities’ activities in the settlements, and whether the EU should recognize academic qualifications from institutions in the settlements.

“Under its own regulations and principles, Europe cannot legally escape from its duty to differentiate between Israel and its activities in the occupied Palestinian territories,” the paper said.

The think tank argues that by pushing to further separate the EU’s businesses with the Jewish state, Israel would capitulate to the mounting pressure on its banking sector and return to talks with Palestinians on a two state solution.

Israel’s Foreign Ministry dismissed the report as only a recommendation.

“This is a report of the European Council on Foreign Relations and not the European Union, and we have no intention of referring to this document,” the Foreign Ministry said response to the report.

Deputy Foreign Minister Tzipi Hotovely said it would have no operative conclusions, and that Israel was deep in dialogue with the EU over boycott and sanction initiatives.

Following the publication of the report, the stocks of the First International Bank of Israel, Leumi, Hapoalim, and Dexia dropped in value, according to Reuters.

Israel has long described efforts increasing economic and political pressure on Israel to change its settlement policy in the West Bank and East Jerusalem as discriminatory, likening them to the Boycott, Divestment and Sanctions (BDS) movement, which Israel considers to be anti-Semitic and promotes the delegitimization of Israel.

Mattia Toaldo, policy fellow and co-author of the report, said the time had come for Europe to defend its policy of “differentiation,” saying Israel’s refusal to end its occupation policy gave the EU the “legal requirement to do so itself.”

“And there is a strong political imperative, as well as a legal one. Differentiation can help modify the calculations that underpin the status quo on the Israeli side and ultimately create the conditions for a meaningful peace process,” Toaldo said.

A June report by Israeli financial publication Calcalist said that if the EU implemented its plan to label goods exported from Israel that are produced in the occupied territories, the measure could cost Israel’s economy $1.4 billion a year.