Israel links EU support for Palestinians to anti-Semitism

"It's very easy to put all the blame in the world on the Jewish state. As Joschka Fischer, the former German foreign minister once put it in Israel, he said: 'I cannot ignore the fact there is an old European tradition of 2,000 years to blame the Jews.' So maybe some of the animosity toward the state of Israel is a disguised [form of this], is coming from this tradition."

Palestinian diplomats say around 10 European countries, including Greece, Ireland, France, Spain and Sweden, as well as non-EU member Norway, will back the UN bid, which is to take place in September.

The initiative to create an independent Palestine outside the framework of Israeli-Palestinian peace talks comes amid a long-standing deadlock in the negotiations.

It also comes after the moderate Fatah movement, which controls the Israeli-occupied West Bank, agreed to create a unity governent with the militant Hamas group, which controls Gaza and which is listed by the EU as a terrorist entity because it advocates armed resistance against Israel.

Steinitz denied that Israeli settlement-building on occupied Palestinian land is the main obstacle to peace.

"Once it will be clear that the Arab people, including the Palestinians, really recognise Israel's right to exist as it was established as a Jewish state, then I think it will be possible to achieve an agreement," he said.

The minister described the UN plan as a "challenge to Israel's very existance" because it would bypass deal-making on questions such as the right of return of hundreds of thousands of Palestinian refugees driven out by Israeli soldiers in the 1940s.

The finance chief threatened to permanently block transfers of Palestinian tax income to the Palestinian authorities if they stick with the Hamas pact. He said Israel's confiscation of tax income this month is "temporary, a warning sign."

He added: "If they will co-operate with this terrorist organisation ... we will have to reconsider whether we can co-operate with them, whether we can deliver money they might misuse to fund terrorist organisations or terrorist acts."

Steinitz' anniversary speech in Brussels celebrated Israeli military victories over Arab forces and described the nuclear-armed regional superpower as a "tiny, miniscule" entity. It also spoke of Israel as a "Western" country with advanced democratic standards and a high-tech economy in contrast to its Arab neighbours.

About 400 EU diplomats, MEPs and senior officials, such as European Commission president Jose Manuel Barroso's chief of staff, Johannes Laitenberger, came to the event.

The Israeli celebration stands in contrast to a similar party hosted by the Iranian ambassador in February, which attracted a trickle of mostly Arab, African and Asian diplomats, as well some EU parliament offiials wary of being seen by press.

The strong turnout for Steinitz on Tuesday masks the fact that EU-Israel relations are at a low point. Several EU countries are continuing to block a planned 'upgrade' in diplomatic contacts with Israel and EU foreign affairs chief Catherine Ashton has refused to join the US in condemning the Fatah-Hamas pact.

"We call on our friends in Europe to stay beside us, to secure Israel, to secure the peace process," Steinitz told EUobserver. "I hope Europe will stay beside us."

Israeli Finance Minister

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