The European Union is inching towards issuing EU-wide guidelines on the labeling of produce from Israeli settlements in the West Bank; agreement could be reached as early as later this month at the regular meeting of EU foreign ministers.

If there is delay, most likely to accommodate current American efforts at resuming peace negotiations, it is likely to be short-lived. The U.S., predictably, will discourage labeling. But even President Obama fully expects Europe to move in the direction of taking these steps: whereas America might indulge every Israeli action, in the absence of progress towards two states, the rest of the world will not. This was part of Obama’s Jerusalem pitch as to why, for Israel, peace is necessary as well as being both just and possible.

The anticipated European action has provoked controversy and a volley of invective against labeling and its promoters from the usual chorus of defenders of "Greater Israel".

It is important, to begin with, to understand what exactly is under consideration. European labeling is being undertaken as a technical matter of consumer choice and in line with agreements signed between Israel and Europe. Europe is not proposing to ban or boycott settlement products, and the proposed application of the action is limited.

In itself, the economic impact on Israel and the settlements will be minimal. So why all the fuss?

Opponents of labeling are, after all, hurling all manner of accusations at the EU, but their arguments tend to range from the incoherent to the unpersuasive. Singling out Israel? No, the settlements are not part of Israel, and more to the point, what singles out Israel is how little it has been practically impacted by international action after 46 years of occupation and illegal settlement.

Bad for the peace process? No, that would confuse cause and effect. The challenge to peace is the settlements themselves, not the labeling of their produce (although American efforts to resume peace negotiations might lead Europe to wrongheadedly consider delaying the issuance of the labeling guidelines).

A recent Haaretz opinion piece by a Fellow at the occupation-apologist and Orwellian-named “Foundation for the Defense of Democracies” ("Germany's gift to BDS") claimed that labeling “will blur the lines between an all-encompassing boycott of Israeli merchandise and demarcation of settlement products.” Nonsense, it would do exactly the opposite. Demarcation is precisely what labeling does. Not even the Israeli Foreign Ministry pushes that line; their official talking points have focused on the claim that labeling could negatively impact the Palestinian economy and Palestinian jobs. If Israel cared about the Palestinian economy it would end restrictions on the movement of Palestinians goods, labor and services, would allow Palestinians to trade freely with neighbors and to access resources in the West Bank – such as land and water. It might, even end the occupation.

This is also not a particularly clever argument from people who are trying to refute any analogy between the occupation and apartheid - this is exactly the kind of arrogant, patronizing and paternalist argument used by South African officials against sanctions during the apartheid era.

Legally and technically, there is simply no counterargument. Israel has not annexed the West Bank, and its trade agreement with Europe does not cover the settlements. Settlement products are not made in Israel and therefore cannot be labeled as such.

Which brings us to the core of the issue: It is the active opponents of labeling who want to avoid any distinction between so-called “Israel proper” and the settlements. Partly, this is based on a Manichean worldview in which, by definition, Israel can do no wrong and should never be criticized. But mostly it is about protecting the future of a Jewish and non-democratic Greater Israel by preserving impunity for Israel’s policy of occupation and settlements.

That impunity – no costs or consequences for the status quo of denying basic Palestinian freedoms – is vital in facilitating the indifference and apathy of mainstream Israel toward the Palestinian issue. Labeling and other measures designed to re-draw the ‘67 lines do matter, if the Israeli public and political debate is ever to be woken up. Impunity equals no hard choices for Israelis, the freedom to embrace occupation-indifferent Yair Lapid and Haredi-bashing as the number one national priority. All of which is extremely problematic for Israel’s future well-being, security and national moral compass.

But the anti-labeling campaigners have not stopped there. In an attempt to bully, scaremonger and silence debate, they are irresponsibly throwing around accusations of anti-Semitism and even abusing the memory of the Holocaust.

This approach is not only factually wrong and morally repugnant; it also carries an element of actual danger to Jewish communities in Europe. Factually, this is not a boycott of Jews. It is accurate labeling of the source of origin of products that happen to be produced by a very specific section of the Israeli-Jewish community. More disturbingly, the scurrilous accusations by opponents of labeling are now being used, especially in Germany, to score cheap political points in an election year, in one instance against the German Green Party and its Bundestag member Kerstin Müller (who happens to be very close to Israel). This attack was apparently intended to intimidate both the Greens in domestic politics, and the work of their political foundation, the Heinrich Boell Stiftung, in its support for pro-human rights and diversity work inside Israel.

People who take anti-Semitism seriously do not play so loosely with the darkest chapters in Jewish history. And the most egregious aspect of screaming “Nazism” at the labeling campaign is that it comes at a time when heightened vigilance is called for against real manifestations of racism and anti-Semitism in a Europe of economic austerity and resurgent xenophobia – Muslim immigrant communities are the main targets, but anti-Semitism too is rearing its head (see Greece's Golden Dawn party).

The anti-labeling campaign cheapens and discredits the entire debate about contemporary anti-Semitism at a particularly inopportune time. Then again, the Greater Israel activists appear to prefer to prioritize their primary goal – the dispossession of Palestinians – over the well-being of non-settler Jews, whether they reside within Israel proper or in Europe.

Daniel Levy is the Director of the Middle East and North Africa Program at the European Council on Foreign Relations (ECFR). He is also a Senior Research Fellow at the New America Foundation.