The European Commission is in the process of implementing territorial guidelines for its future co-operation with Israel.

The guidelines state that no EU grants, funds and financial instruments should go to Israeli companies or institutions located in Israel's settlements in the occupied Palestinian territories or to projects either being implemented in the settlements or as part of Israel's settlement enterprise.

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The guidelines are a practical implementation of longstanding EU policies, which view the settlements as illegal, detrimental to achieving a viable Palestinian state as part of a two state solution, and not worthy of any (financial) support.

Contrary to the vehement opposition to these guidelines by the Israeli government, the EU is actually doing Israel a big favour by implementing them.

When the EU published its guidelines, the Israeli government reacted with great anger, saying they are harming the current round of Israeli-Palestinian peace negotiations and are unnecessarily harsh.

The European Friends of Israel (EFI) group in the European Parliament went so as far as to claim that the guidelines would do great damage to some 25,000 Palestinian labourers in the settlements, ignoring the far more disastrous impact the settlements and closure policies have on the overall Palestinian economy.

The guidelines are a clear-cut example of Europe adopting a realistic and balanced approach to the Israeli-Palestinian conflict.

The fact of the matter is that the EU has long accepted a negotiated two-state solution as the only way to achieve peace in Israel and Palestine.

The settlement enterprise prevents this solution from being successfully implemented: it creates geographical facts on the ground on lands designated to become part of an independent and viable Palestinian state, fueling Palestinian frustration and anger.

Over 550,000 settlers have moved to the settlements in the West Bank (including East Jerusalem) since the beginning of Israel's occupation of the Palestinian territories in 1967.

Considering that most agreements between the two parties call for the relocation of a fair share of these settlers - if not it would make a fully independent Palestinian state near to impossible - one can just imagine that the more settlement homes that are being built, the harder it gets to evacuate them.

This is not to forget the blatant illegality of the settlements according to international law.

By reinforcing the notion that the settlements are illegal and by introducing these guidelines, the EU is basically sending out a clear message: we want to respect international law, and we want to contribute to a two-state solution.

The European Friends of Israel and others who have spoken out against the guidelines and who consider themselves "friends of Israel" should focus on ending the occupation, instead of lending uncritical support to an Israeli government trying everything in its power to shield its illegal policies from any serious deterrent.

If they want Israel to survive as a democratic state, they should realise that ending the occupation is a necessity.

Instead of criticising Europe for "harming" EU-Israel relations, they should ask themselves why the Israeli government is jeopardising relations by pursuing policies deemed illegal by the international community and international law.

By doing so, and by taking a stance against the occupation, they would actually be doing Israel a favour far greater than by backing its policies at all costs.

The writer is chairman of the Amsterdam-based Jewish NGO A Different Jewish Voice