As part of an international effort to discourage Israeli activity in the West Bank, a major European think-tank has proposed placing sanctions on Israeli financial institutions.

Earlier this week, the European Union pushed ahead with a controversial labelling law. Designed to clearly demarcate Israeli-manufactured imports from occupied Palestine, EU leaders hope the labels will discourage Israeli activity in both the West Bank and East Jerusalem.

The office of Prime Minister Benjamin Netanyahu has strongly criticized the plan.

"This is a mistake, it is counterproductive, it does not serve the cause of peace and it is not fair to single Israel out while the EU does not do this in any other place on the planet," Mark Regev, a spokesman for the prime minister, said according to the Telegraph.

"Ultimately the issue of settlements will be resolved in peace talks with the Palestinians that we hope will start soon."

To pressure Israel into those peace talks even sooner, the European Council on Foreign Relations, an influential think-tank, proposed on Wednesday that the EU take even more drastic steps: financial sanctions.

"Under its own regulations and principles, Europe cannot legally escape from its duty to differentiate between Israel and its activities in the occupied Palestinian territories,” the organization’s report, entitled “EU Differentiation and Israeli Settlements," reads.

For one, the ECFR suggests that the EU take advantage of European Commission guidelines set up in 2013. While not legally binding, the guideline states that EU member states cannot provide lending to any Israeli institutions operating in occupied territories.

"Do day-to-day dealings between European and Israeli banks comply with the EU requirement not to provide material support to the occupation?" the report asks.

Given the large number of daily interactions between Israeli entities and European banks, enforcement of the guidelines could have a significant effect.

Enforcement could also be placed on regulations concerning individual mortgages. European banks could be barred from granting loans to Israeli citizens who list property within occupied territory as collateral. The ECFR argues such a practice should already be in place, since Israeli-issued deeds to property within those territories is not officially recognized by Europe.

The group also suggested that the European Union could be violating the guidelines in ways which extend beyond personal finance. Europe could apply pressure by refusing to supply funding to Israeli academic or medical institutions based within the West Bank.

The EU could also revoke the tax-exempt status of any European charities operating in or conducting business with the settlements.

The ECFR also suggested a severing of ties between the EU and any government agencies based in East Jerusalem. These would include the national police and the Israeli Ministry of Justice.