US Secretary of State John Kerry’s efforts to revive talks between Israel and the Palestinian Authority suffered a serious blow on Tuesday. But this time it wasn’t the Palestinians or the Israelis who derailed the process, but the US’s ostensible ally in the quest for peace, the European Union.

You don’t have to be a dyed-in-the-wool Likudnik to understand that the clear and immediate effect of the EU’s new policy directive barring cooperation with Israeli entities over the pre-’67 line will be to prompt the hardening of the already inflexible Palestinian position regarding new talks.

Publication of the new directive coincided with Kerry’s latest visit to the region in his indefatigable bid to restart the talks. Some voices in Israel have hinted that the EU decision was taken in coordination with the US administration, and even with Kerry’s approval, with the goal of pressing Prime Minister Benjamin Netanyahu to show greater conciliation in dealings with the Palestinians or at least to slow construction in the settlements. This notion seems fanciful.

Kerry, who is thoroughly familiar with the Israel-Palestinian arena, would know that the PA is now even less likely to abandon its pre-conditions to new talks. If anything, it will only add new ones. And the conditions that the PA is presenting are not realistic: not merely Israeli acceptance of the pre-’67 lines as the basis for negotiation, but also a complete freeze on building over the ’67 lines, and the release of all prisoners arrested before the Oslo accords.

The EU decision comes at a critical juncture in the US-led effort to resume talks. And rather than pushing both sides towards greater flexibility, the EU is essentially saying to the Palestinians, “No need to hurry. Whatever you don’t get by negotiations, we’ll be sure to attain for you by force [of economic sanctions].”

Predictably, the Palestinians rushed to praise the EU move. The PA did so, and so too did Hanan Ashrawi, the representative of the PLO’s executive committee, who described the new directive as a qualitative development in the EU position. The Palestinians, said Ashrawi, have been demanding for a long time that the nations of the world translate into action their decisions on the issue of settlements, and make plain to Jerusalem that there is a price to pay for its activities. She also urged other nations to take similar steps.

Ashrawi is right: That is indeed the Palestinian position. And now the Palestinians have no particular incentive to agree to return to the negotiating table. With regard to the international community, time is working for the Palestinians and against Israel, whose standing is gradually and relentlessly eroding.

Israel, for its part, has no reason to be too surprised by the EU move. The EU is simply punishing Israel’s decision-makers for having done everything possible to ignore Europe when it comes to the peace process.

Apart from the immediate damage done to Kerry’s efforts, it must be said, the EU has achieved something that Palestinian and American diplomats have been unable to do for a long time: It has returned the Palestinian issue, and the arguments surrounding settlement, to the top of the Israeli agenda.

It is difficult to recall the last time that news bulletins here opened with issues such as building in the territories and the need to return to negotiations with the Palestinians. Yet that is what’s been happening for the last two days.

Suddenly the Israeli public and its apathetic government ministers are discovering that this Palestinian issue, this “shrapnel in the butt” as Jewish Home leader and Economics Minister Naftali Bennett recently described it, can cause real difficulties when it comes to sitting down. Or settling.