JERUSALEM — The European Union's decision Wednesday to start labeling Israeli products made in the West Bank delivered a resounding show of international disapproval over Israel's expansion of Jewish settlements and raised the pressure on Prime Minister Benjamin Netanyahu to renew peace efforts with the Palestinians.
Israel condemned the measure as unfair and discriminatory, but it appeared helpless to stop its growing isolation over the settlement issue and its treatment of Palestinians. Relations with the EU in particular have deteriorated in recent years due to disputes over the settlements.
"The EU decision is hypocritical and constitutes a double standard," Netanyahu said, adding that Israel had been unfairly singled out.
Speaking from Washington, he said, "The EU should be ashamed."
Israel captured the West Bank and east Jerusalem in the 1967 Mideast war and began settling both areas shortly afterward. The Palestinians claim both areas as parts of a future state, a position that has global support.
The international community opposes settlement construction, saying their continued growth undermines establishing an independent Palestine alongside Israel. Today, nearly 600,000 Israelis live in the two areas, almost 10 percent of the country's Jewish population.
Israel's centrist and dovish opposition also supports the idea of a Palestinian state, saying a separation is the only way to preserve Israel's Jewish majority. While Netanyahu has endorsed this "two-state solution," critics say he has done little to promote it.
The EU decision is "dramatically adverse to the idea of moving toward peace with our neighbors," opposition leader Isaac Herzog told reporters in New York.
Another opposition lawmaker, Tzipi Livni, said Israel could thwart the Europeans' move if it shows it is serious about pursuing peace. "We need the right policies. We don't need public diplomacy and we definitely shouldn't yell at them that they are anti-Semitic," the former foreign minister said on her Facebook page.
EU officials described their decision as technical, saying it merely clarified existing policy.
Lars Faaborg-Andersen, the EU ambassador to Israel, said the 28-nation bloc does not recognize lands captured in 1967, including Israeli-annexed east Jerusalem, as Israeli territory. "This is something that also happens to be the view of 99 percent of the international community," he said in Jerusalem.
The EU has taken other steps to protest settlement construction. A free-trade policy with Israel does not apply to settlement goods, and a landmark technology-sharing agreement does not allow EU funds to be spent beyond Israel's pre-1967 lines.
The economic impact is likely to be minimal. While the EU is Israel's largest trade partner, settlement products account for less than 2 percent of Israel's 13 billion euro ($14 billion) exports to Europe each year. But the move is highly symbolic.
Once implemented, European consumers will be able to read on the label of most products — including agricultural goods, olive oil, cosmetics and wines — that were produced on Israeli settlements. Although such products will not be banned, Israel fears the labels will be a political stigma and could lead to a fuller boycott.
On Tuesday, Cabinet Minister Yuval Steinitz accused Europe of "disguised anti-Semitism." Officials avoided such language Wednesday, but the reactions were swift and angry nonetheless.
The Foreign Ministry accused the EU of taking an "exceptional and discriminatory step" inspired by an international anti-Israel boycott movement. In a first step, it summoned the EU ambassador to convey its objections and suspended the meetings of several bilateral working groups with the EU.
Israeli officials noted the decision came amid a two-month wave of violence, which has been characterized by dozens of seemingly random Palestinian stabbing attacks, and would weaken any incentive for the Palestinians to return to negotiations. Defense Minister Moshe Yaalon called it a "shameful step that grants terror a prize."
Avi Roeh, chairman of the Yesha settlers' council, said "this attempt to isolate us or differentiate us from the rest of Israel won't succeed." He said the biggest victims would be the estimated 80,000 Palestinians who risk losing their jobs if the businesses that employ them in the settlements are hurt.
The violence began in mid-September with clashes at Jerusalem's most sensitive holy site and quickly spread across Israel and into the West Bank and Gaza Strip. A total of 12 Israelis have been killed, mostly in stabbings, while 77 Palestinians, 50 of them said by Israel to be attackers, have died.
Israel accuses Palestinian leaders of inciting the violence. The Palestinians say it is the natural result of nearly 50 years of Israeli occupation. Some 60 percent of the West Bank, including all Jewish settlements, is under full Israeli control, heavily constricting their hopes of developing an economy and building a state.
"I highly appreciate what the EU countries did on the products of the Israeli colonial settlements," Palestinian President Mahmoud Abbas told a summit in Saudi Arabia.
The last round of U.S.-brokered peace talks broke down a year and a half ago, and President Barack Obama recently acknowledged there probably would be no more talks, much less an agreement, in his term. In the past, he has said the continued settlement construction raises questions about Israel's seriousness for peace.
U.S. State Department spokesman Mark Toner said before the EU announcement that the move "shouldn't come as a surprise" as Israel continues to expand settlements. "This underscores the urgent need for Israel to change its policies with regard to settlements," he said.
While running for re-election early this year, Netanyahu said he would not allow the establishment of a Palestinian state on his watch. He has backtracked on that, and at a White House meeting this week, he reiterated his support for a two-state solution but again gave no indication on how to move things forward.
On Tuesday, he raised the possibility of unspecified "unilateral" Israeli steps. Dore Gold, the director of Israel's Foreign Ministry and a Netanyahu confidant, said several suggestions were raised with the White House. He declined to elaborate.
Israeli opposition lawmaker Yair Lapid, a former finance minister who supports the two-state solution, called the EU move a disastrous step that would only strengthen extremists on both sides. He said it sent a message to Palestinians that they do not need to negotiate to get what they want, while it would reduce Israelis' faith in international mediation.
"If this is meant to be a wake-up call, it's counterproductive," Lapid told The Associated Press. "They just pushed back the possibility of negotiations and separation."
Casert reported from Brussels. Alon Bernstein and Ian Deitch in Jerusalem, Mohammed Daraghmeh in Ramallah, West Bank, Edith M. Lederer in New York, and Bradley Klapper in Washington contributed to this story.