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Yet despite deep historical links, relations between Israel and Europe have grown rockier in recent years, with the EU increasingly vocal in criticism of Jewish settlements, saying they imperil the chances of peace with the Palestinians.
Matters came to a head in July when the EU’s Executive Commission announced it would bar financial assistance to any Israeli organisation operating in the West Bank from 2014.
The move finally put some teeth into EU opposition to settlements built on territory Israel seized in a 1967 war and which are now home to more than 500,000 Israelis. Palestinians want the land for part of a future independent state.
A second Israeli official, also speaking on condition of anonymity, said the compromise was reached between Israeli Justice Minister Tzipi Livni and EU foreign policy chief Catherine Ashton.
Under the compromise reached, the EU prohibition of funds for groups in occupied territories will be referenced in an appendix to the deal while Israel will add its own appendix stating it does not recognise the new guidelines, the official said.
Israeli companies and organizations that have operations on occupied land can request funds if they ensure the money does not cross the pre-1967 border.