Jerusalem: Israel and the European Union will drift apart if they cannot compromise on new EU guidelines covering Jewish settlement on occupied land that could damage research and trade ties, Israeli`s deputy foreign minister said.
The two sides must overcome the dispute - focused on territory that Palestinians want for a state - before the end of November, when a multi-million dollar EU research programme called Horizon 2020 is due to be finalised.
If there is no deal, Israel risks missing out on generous funding for its scientists. By the same token, Europe will lose Israeli-know how, Deputy Foreign Minister Ze`ev Elkin said.
"If we fail to resolve this problem, the future direction will be a kind of separation between Israel and the European Union," Elkin said in an interview.
"We are the start-up nation. It would be a big mistake for Europe to lose its relations with Israel," he said.
A senior EU official visited Israel this week, promising that the 28-nation bloc wanted to work closely with Israel and its burgeoning hi-tech economy, but all efforts so far to bridge their differences have failed.
Despite Israel`s intimate diplomatic and military ties with the United States, its biggest economic partner by far is the European Union, which accounted for almost third of all exports and imports into the Jewish state last month.
Despite deep historical links, relations between Israel and Europe have grown more bumpy in recent years, with the EU increasingly vocal in its 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.