The decree, which will go into effect Friday, will forbid any cooperation, awarding of grants, prizes and funding for any Israeli entity in the specified areas.
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The EU's funding, direct and indirect, of Israel bodies which operate in the settlements has long drawn fire from various organizations within the Union. The EU is severely opposed to Israeli construction beyond the 1967 lines, and has acted repeatedly to draw a clear line between Israel and its settlements in the West Bank.
Israeli settlement Beit El
The latest decree resulted from the EU Foreign Affairs Council's conclusion from December 2012, which stated 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."
However, the directive will not harm funding for research institutes, such as the Hebrew University, which employs settlers in their staff. Government ministries which have offices in east Jerusalem, such as the Justice Ministry, will still enjoy the EU's cooperation as well.
An EU official said on Tuesday that Israel should not be surprised with the directive, as the issue has been repeatedly addressed and forewarned by EU officials.
The new directive, said the official, is in line with opinions in the EU which have been prevalent for several years.
MK Ariel: Decision tainted with racism
Deputy Minister in the Prime Minister's Office MK Ofir Akunis said in response that "it's a wrong and regrettable decision. Such steps – even before the Palestinians announced they are even ready to return to the negotiation table – are pushing the peace talks away, not drawing them closer.
"Let them know even in Europe – Judea and Samaria are not 'occupied,' they're the homeland of the Jewish nation."
Housing Minister Uri Ariel (Habayit Hayehudi) said in response to the decree: "This decision is tainted by racism and discrimination against the Jewish people which is reminiscent of the bans against Jews in Europe over 66 years ago,"
Minister Ariel added that "The Israeli government must not, under any condition, be a part of any future agreement which includes a clause that Judea and Samaria are not a part of the sovereign State of Israel."
The Yesha Council stated that "To our regret, in Tisha B'av Europe has returned to a policy of boycott and segregation against the State of Israel. Europe's unrestrained support of the Palestinian Authority has turned it into a non-neutral element.
"The Israeli government must instruct the Foreign Ministry and the Defense Ministry to immediately halt all European projects in Judea and Samaria until this unilateral decision is aborted."
Some in the Israeli Left congratulated the EU's decree, and accused the government of bringing it upon itself by not pursuing the peace process. "The EU is doing Israel a favor by marking the border which the Israeli government failed to mark," said Meretz Chairwoman MK Zahava Gal-On.
"This isn't a boycott of Israel, but a distinction between Israel and the settlements and the occupation. The decision is the result of the complete impasse in the peace process and continued construction in the settlements and outposts," she added.
Peace Now said in response that "The EU's decision sends a clear message: The world doesn't recognize the settlements and they contradict universal, democratic values. The Israeli government is running a rearguard battle against the international understanding that the Israeli occupation of the territories must end."
Meanwhile, Ynet found that the Civil Administration's High Planning Committee will convene on Wednesday to discuss plans for building 1,071 new housing units in the West Bank.
The focus of construction will be in Modiin Illit, where a new, 732 units strong neighborhood is planned. In addition, the committee will discuss the retroactive issuing of building permits for houses already constructed.
Peace Now said in response that "The wave of building permits is unprecedented. It sends a clear message to the world – the government doesn't want a peace process."
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