Arab intellectuals and policymakers have often accused Europe of using financial generosity to cover up its political impotence over the Arab-Israeli conflict. If Europe is to be taken seriously as a global player, they argue, it must also flex some muscle when it delivers the money.

In Arab eyes, European officials implicitly plead guilty to these charges by pointing to Europe’s complex multilateral politics and the European Union’s bureaucratic nature. Europe’s Arab interlocutors are unimpressed: they want Europe to stop talking like a Great Power and start acting like one.

But it is precisely the EU’s desire to look more and more like a nation-state that has pushed its position on the Arab-Israeli conflict in the wrong direction. Europe’s inability to play a political role in the Middle East peace process was wrongly diagnosed as resulting from a European bias against Israel. Policy advisers argued that gaining Israel’s trust was necessary to win support for a European role in the peace process. Almost nothing became too dear in this quest: technology transfers, upgraded relations, association agreements, and even, reportedly, the prospect of Israel’s joining the EU.

European policy thus revolved around simultaneously seducing Israel and bribing the Palestinian Authority. Financing Israel’s occupation of the Gaza Strip and the West Bank served both objectives at the same time, at a cost to European taxpayers of several billion euros. Yet this policy earned Europe neither recognition nor relevance. Palestinians continued to trivialize Europe’s contribution, and Israelis to loathe it for “financing Palestinian terror.”

In the end, Europe paid a lot of money only to expose its own weakness. How much worse can things get before the EU abandons its counterproductive policy?

The idea that Europe can seduce the occupier into giving it a role in ending the occupation seems wrong-headed. Israel does not want an even-handed mediator but an unconditional supporter. This is partly why Israel prefers the United States as sole mediator, and it is also why Israel’s acceptance of a monopoly role for the US evaporates as soon as any American president starts developing views different from its own.

When this happens, America’s ability to project power makes all the difference. In other words, no matter what blandishments are showered upon Israel, when push comes to shove it is the ability to use power – not charm – that determines whether an outside power has a say in advancing Arab-Israeli peacemaking.

Europe’s failure to play a role in resolving this conflict does not result from its supposed anti-Israeli views, but from the fact that the EU is not a state. States are not given roles; they acquire them by the power assets they can deploy. And Europe cannot deploy the type of power needed to tilt the balance in Arab-Israeli peacemaking.

But Europe can do other things. To change the Israeli-Palestinian dynamic, external actors now need to influence the political calculus inside Israel and Palestine by lowering the political cost of peace and raising the cost of occupation. Any meaningful Arab-Israeli peace depends on Israel’s return of Palestinian territories, with certain conditions. However, no Israeli government will be willing or even able to do so unless the political calculus inside Israel changes. Making withdrawal a tolerable political option (or making occupation a more costly one) is needed to trigger a meaningful peace process.

Europe has already tried incentives for withdrawal, but that alone will not suffice; the cost of occupation must also be raised. In plain English, an “occupation tax” is needed. This would be different from applying sanctions, which would risk triggering a “Masada Complex” that might push Israel to further extremes. Instead, an occupation tax would target the settlers’ economy and the violation of Palestinians’ human rights.

Such a tax should start with turning the European Union’s current exclusion of Israeli settlements’ products from preferential customs treatment into a full-scale ban on imports from settlements – and any transactions with them. Companies and banks should be barred from doing business in or with the settlements, especially with construction companies and their suppliers. Pressure should be exerted on Israel to end its financial assistance to settlements.

The occupation tax should also include action aimed at ending the virtual impunity enjoyed by the Israels Army. Israeli military officials argue that some level of human rights violation is inevitable during occupation, and that the record of Israel’s armed forces is not much worse than that of any other occupation army.

They are right: An occupation cannot be sustained without the systematic violation of human rights. That is precisely why these violations must be made costly: to signal to Israeli voters that the cost of occupation is bound to rise. This can be done if Europe supports investigations of suspected war crimes and other violations of international humanitarian law committed by the Israeli armed forces, as well as the establishment of international tribunals when such crimes occur.

Only the United States can bring Israelis and Palestinians to a new negotiation process. Europe and others can support such a process, but mainly by affecting internal political calculations in Israel. Such a role would better protect Europe’s broader interests in the Middle East, while allowing it to remain faithful to its values.