Germany will reach a decision on whether to back sanctions against Israel before a European Union meeting in Copenhagen in October, Chancellor Friedrich Merz said on a visit to Madrid on Thursday.
Merz said Israel's actions in Gaza were not proportional to its stated goals, but said Germany did not share the view that the actions amounted to genocide.
He added that for Germany, the recognition of Palestinian statehood was not currently up for debate.
France, Luxembourg, and other European nations plan to recognize a Palestinian state at the end of the month at the United Nations General Assembly.
Additionally, the United Kingdom will allegedly recognize a Palestinian state as soon as next week after US President Donald Trump finishes his state visit there.
EU levies sanctions on Israel
Merz's comments come after the European Union proposed to suspend parts of its free trade agreement with Israel, affecting about 5.8 billion euros of Israeli exports.
European Commission President Ursula von der Leyen added that the EU would be levelling sanctions against extremist Israeli MKs, West Bank settlers, and Hamas.
The EU is Israel's largest trading partner, and accounts for 32% of Israel's total international trade.
If the free-trade arrangement is suspended, Israel would face duties at the same level as other countries without a trade accord with the bloc.
“The horrific events taking place in Gaza on a daily basis must stop. There needs to be an immediate ceasefire, unrestrained access for all humanitarian aid, and the release of all hostages held by Hamas," Von Der Leyen said.
She added that the EU would be putting bilateral support to Israel on hold, but would continue to support Israeli civil society and Yad Vashem.