The foreign policy of the Netanyahu government, which deems unacceptable the two-state solution to the Israel-Palestinian conflict as an outline for negotiations with the Palestinians, has damaged Israel's relations with the European Union.

The Anapolis conference in late 2007, which set the outline of the two-state solution, made it possible for Israel to strengthen its ties with Europe. The main expression of the closer ties has been the forging of agreements to hold summits with European heads of state and foreign ministers, and for Israel to participate in programs and agencies of the European Union.

However, an internal Foreign Ministry document last week stated that following Operation Cast Lead, diplomatic bodies in a number of European countries have called for a freeze on the upgrade, citing the pressure of domestic public opinion. Four European states have already said that if Israel did not agree to a two-state solution, they would oppose upgrading relations.

Under such circumstances, the upgrade would have to be shelved since a unanimous vote is required to implement it.

The deputy director general of the Swedish Foreign Ministry, Robert Rydberg, who visited Israel ahead of his country's assuming the rotating EU presidency in July, was told by the new deputy foreign minister Dan Ayalon that Jerusalem is reassessing its peace policy. Rydberg responded that if so, the upgrade of relations would be frozen. Rydberg told Ayalon that a European decision on strengthening ties with Israel would be examined in the context of the implementation of a two-state solution.

A senior Foreign Ministry official who is very familiar with Israel's relations with Europe said that Europe is also an important player vis-a vis-Iran, and that Israel's national security was guaranteed "first of all [by] us, then the United States, and the third leg is Europe. We have been in the midst of a flourishing security and diplomatic dialogue and in recent years relations of trust have developed as with the Americans," the official said.

The Foreign Ministry denies that Israel's relations with Europe are in danger. "Jerusalem has not received official messages warning that the upgrade might be prevented, although European officials have privately expressed their support for the peace process."