Far-right Israeli MPs stormed out of the Knesset in protest on Wednesday as the German president of the European parliament pledged that the EU would always support Israel but highlighted Palestinian suffering and the "siege" of the Gaza Strip.

Naftali Bennet, the economics minister and leader of the religious-nationalist Bayit Yehudi (Jewish Home) party, led a walkout in response to what he condemned as Martin Schulz's "lies".

Schulz's speech mentioned the importance of remembering the Holocaust. But his comments on the living conditions of Palestinians proved too much for Bennet and his supporters.

Binyamin Netanyahu, Israel's prime minister, weighed in to accuse Schulz of "selective listening" by saying that Israelis consumed 70 litres of water a day compared with 17 litres for Palestinians. "Even the Palestinian water authority says the discrepancy is much smaller," Netanyahu said. "Schulz admitted that he didn't check if what he said is true, but he still blamed us. People accept any attack on Israel without checking it. They plug their ears."

Bennet wrote on his Facebook page: "I call on the prime minister to demand an immediate correction in the name of the state of Israel. I will not accept an untrue sermon on morality directed at Israel in Israel's parliament. Definitely not in German."

In 2009 a World Bank study found that in 2007 Israelis had access to 4.42 times more water than did the Palestinians in the West Bank. But Israeli media quoted Israel's national water authority as saying the figures quoted by Schulz were inaccurate, with West Bank settlers consuming 1.7 times more water per person.

On Tuesday Schulz made clear that the EU had not boycotted and would not boycott Israel over its settlements in the occupied territories. "In the European parliament there is not a majority for a potential boycott," he said.

Last year the EU decided to block grants and funding for any Israeli entity operating beyond the country's pre-1967 borders, building on earlier decisions to require the labelling of goods produced in illegal settlements.

Ten days ago the US secretary of state, John Kerry, warned that Israel would face more calls for boycotts if the current peace talks with the Palestinians collapsed – a statement that was seen as a shot in the arm for the international Boycott Disinvestment and Sanctions (BDS) movement. Schulz said the EU would support the "long road to peace" but added: "Palestinians, like Israelis, want to live in their countries with freedom of movement and no limitations. The Palestinians have the right to self-definition and justice.

"When the goal is the two-state solution, Israel's security will undoubtedly be on the agenda. I'm sure an army can bring calm, but I don't think it can bring peace. Ariel Sharon, RIP, said something I agree with – you cannot have a Jewish democratic state and at the same time rule it all."

Bennet and the other Bayit Yehudi MPs were furious over Schulz's comment that the blockade of Gaza prevented growth. But new figures from the Palestinian Central Bureau of Statistics show the unemployment rate in the coastal strip rose 6% to 38.5% in the last quarter of 2013. The increase followed a ban on transferring construction materials to Gaza's private sector. Unemployment in the West Bank is 18.2%.

"The jump in unemployment in Gaza could be reversed almost immediately if Israel would remove restrictions on civilian movement," said Sari Bashi, of Gisha, an Israeli group that monitors freedom of movement.