Prime Minister Binyamin Netanyahu on Tuesday slammed new EU guidelines preventing grants to Israeli entities beyond the Green Line, saying he would expect those concerned about world stability to deal first with more pressing issues like Syria’s civil war and Iran’s nuclear march.

Netanyahu’s comments came after an urgent consultation in his office on the matter with Justice Minister Tzipi Livni, Economy and Trade Minister Naftali Bennett and Deputy Foreign Minister Ze’ev Elkin.

“As Israel’s prime minister, I will not allow hundreds of thousands of Israelis living in Judea, Samaria, the Golan Heights and our united capital of Jerusalem to be harmed,” he said.

He did not, however, elaborate on how he would fight against the move to restrict EU cooperation only to entities inside the pre-1967 lines.

“We will not accept any external dictates regarding our borders,” he said. “That issue will be decided only in direct negotiations between the sides.”

Later, in an interview with Germany’s Welt am Sonntag newspaper, Netanyahu termed the measure “wrong,” and said it was “an attempt to force on Israel the final borders through economic pressure rather than through negotiations.”

The prime minister said that while this was wrong at any time, it was particularly ill-advised now with US Secretary of State John Kerry trying to get the parties into negotiations.

“It hardens the Palestinian positions, it causes Israelis to lose confidence in the impartiality of Europe,” he said. “I think for years the Europeans have been whining about the fact that the Americans are not involved enough. Now that they are involved, this action actually undermines the American effort. It undermines the negotiations.”

He said Israel would talk to the European Commission, the body that adopted the guidelines, and “I hope we’ll find a practical and effective solution.”

If not, warned Bennett after the meeting in the Prime Minister’s Office, he would call on Netanyahu to end the flow of EU funds to the West Bank, and also to keep the EU out of any diplomatic moves.

“You cannot want to be involved, and then also act unilaterally,” he said.

“In the midst of Tisha Be’av,” he continued, in reference to Tuesday’s fast over the destruction of the First and Second Temples in Jerusalem, “the Europeans are the last ones who can tell us that we are fasting over occupied territory.”

Livni, who has been engaged in a spat with Bennett over the seriousness of European boycott threats, issued a statement saying the EU move was a “resounding wake-up call.”

She said it was unfortunate that Israel had arrived at this point, but hoped now that those who thought the diplomatic stagnation could continue and who said Israel’s position had never been better would understand that Israel must work to begin negotiations with the Palestinians as the only way to safeguard the country’s interests.

The EU issued a statement on Tuesday, following a Haaretz report about the new measure, saying that on June 30 the European Commission had “adopted a Notice containing guidelines on the eligibility of Israeli entities and their activities in the territories occupied by Israel since June 1967 for grants, prizes and financial instruments funded by the EU from 2014 onwards. These guidelines set out the territorial limitations under which the Commission will award EU support to Israeli entities.”

The statement made clear that the purpose of the guidelines, which will govern the activities of all EU institutions and agencies dealing with Israel, was to ensure that “Israeli entities” beyond the Green Line did not benefit from EU support.

These guidelines were prepared as a follow-up to a political decision that the EU’s foreign ministers made at a December meeting in Brussels, which stipulated that “all agreements between the State of Israel and the EU must unequivocally and explicitly indicate their inapplicability to the territories occupied by Israel in 1967, namely the Golan Heights, the West Bank including East Jerusalem, and the Gaza Strip.”

The concern in Israel is that all future agreements with the EU will include that clause, which senior Israeli officials said Tuesday it would be impossible for Israel to sign.

One senior official said that Israel hoped to enter a discussion with the EU to tone down the territorial clause of future agreements, so that the EU would be able to get its point across and Israel would still be able to sign.

For instance, in the recently signed Open Skies agreement – an aviation deal that benefits both Israel and the EU – the territorial clause reads: “The application of this agreement is understood to be without prejudice to the status of the territories that came under Israel’s administration after June 1967.”

“That is language we can live with,” the senior official said.

An example of language that Israel cannot live with, he added, was the draft of the next stage of the Euro-Med Youth Program.

According to the draft wording, “this agreement will be implemented in conformity with the European Union’s position that the territories that came under Israel’s administration in June 1967 are not part of the territory of Israel.”

By signing that type of language, Israel would – in effect – disown its own laws, since the Knesset has legislated the annexation of both Jerusalem and the Golan Heights.

The official said the Europeans knew this type of language was a non-starter for Israel, and that Jerusalem’s hope was that language could be found for future agreements somewhere between those two poles.

“We will have to put this to the test,” the official said. He expressed fear, however, that in the current diplomatic climate – with the talks with the Palestinians stymied and an anti-settlement sentiment growing in Europe – the “Europeans will want to go too far.”

If so, he warned, Israel and the EU would not be signing any more agreements.

The circular to be published officially on Friday runs a couple of pages and differentiates among grants, prizes and financial instruments.

It does not penalize individual people who live beyond the Green Line or government offices located there.

For instance, a scientist who lives in the Samaria settlement of Ariel and works at Tel Aviv University can still benefit from EU grant money for a project on which he or she is working. That same scientist working at Ariel University, on the other hand, would not be eligible for any EU funding.

The terms governing the use of financial instruments, such as loans and bank guarantees, are much stricter. For instance, a company based in Ra’anana that does business both in Herzliya and in the Gush Etzion settlement of Efrat would not be eligible for any type of financial instrument. That same company, however, would be eligible for EU grant or prize money.

Government offices such as the Justice Ministry and the Antiquities Authority, which are housed in post-’67 Jerusalem, would be eligible for funding for projects that are inside the Green Line, even though they also have projects outside the Green Line.

However, the official said, under the guidelines, Jerusalem’s Rene Cassin School in Ramat Eshkol – just past the ’67 lines – could not take part in any EU-sponsored or -organized youth program exchanges.

The official stressed that the guidelines did not deal with trade issues, and that with the exception of one project – an EU project to encourage research and innovation, called Horizon 2020 – the money involved was not the type that “gets a country to change its strategy.”

The Horizon 2020 project, however, is an 80 billion-euro, six-year program, and the official said it would be a “serious blow” if Israel could not participate because of the territorial clause in an agreement.

Sandra De Waele, the chargé d’affaires at the EU Embassy in Tel Aviv, told Israel Radio that the policy articulated in the new guidelines was not new, and that this policy principle had actually guided the EU in the past.

“What is new in these guidelines is that there will have to be an explicit reference to that policy in agreements that are signed between the EU and Israel, and in any agreements or grants that are awarded from the EU that benefit Israel,” she said.

De Waele deflected claims that the EU, through these guidelines, was trying to determine the outcome of the negotiations with the Palestinians. She said that “of course” the delineation of the final borders would be solved in final-status negotiations. The EU move, she said, was “an expression of frustration with continued settlement expansion, but not with the deadlock in the peace process.”

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