Germany's foreign ministry says the decision follows "discussions we have had with our partners following the terrorist attack in Burgas" on the Bulgarian coast last year that killed five Israelis and a Bulgarian bus driver.
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Bulgaria has accused Hezbollah of the attack, a charge the Shiite group denies.
Germany had previously resisted calls to list Hezbollah as a terrorist organization for fear it could destabilize Lebanon.
But the foreign ministry said in a statement Wednesday that Germany's position had changed due to new and clearer information about the Lebanese militant Shiite organization's activities and analysis provided by authorities on the Mediterranean island of Cyprus.
Meanwhile, two officials said Britain has launched a bid to formally have the European Union declare the Lebanese party Hezbollah's military wing a terrorist organization.
That move would slap sanctions such as travel bans and asset freezes on the group's members. The designation requires unanimity by the EU's 27 member nations.
A British Foreign Office official, who spoke on condition of anonymity because he was not authorized to speak to the press, said the matter would be discussed within the next two weeks.
The official said Wednesday the move was fueled by findings indicating the organization was responsible for a terrorist bombing in Bulgaria that killed five Israeli tourists and one Bulgarian.
A diplomat from a prominent EU nation said it would be discussed next month. The diplomat spoke on condition of anonymity pending an official announcement.
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