Relations between Israel and the EU sank to a new low yesterday, as the EU suggested that Israel may have defrauded it out of tens of millions of dollars, by unlawfully obtaining reduced customs rates on exports from Jewish settlements.
The Israeli Prime Minister, Mr Benjamin Netanyahu, in a furious retort, said that the row could "put an end" to any role for Europe in Middle East peacemaking.
The European Commission, in a statement issued in Brussels, said it was seeking to correct "an alleged case of massive fraud" - apparently involving products made at Jewish settlements, mainly in occupied West Bank territory, which were then falsely exported to Europe under the label "Made in Israel." European sources suggested that the false labelling may have cost the EU in excess of $40 million.
Trade agreements between the EU and Israel provide for greatly reduced duties on Israeli exports. But those reductions do not apply, EU officials have stressed, to products manufactured outside Israel's internationally-recognised borders - in areas including the West Bank, Gaza Strip, Golan Heights and East Jerusalem.
In its ferociously worded statement yesterday, the Commission accused Israel of trying to "politicize" the issue, and said that the Israeli government had similarly attempted to politicise a separate "case of fraud" several months ago, when Israel was found to be exploiting its trade agreements with Europe to export orange juice labelled as home produce but actually imported from Brazil and the US.
Israeli officials retorted that it is Europe that is politicising the issue. The officials claimed that the EU has known for years that Israeli exports include goods made at West Bank settlements, and is highlighting the issue now only to pressurise the Israeli government into making compromises on the peace process with the Palestinians.
A firm EU decision on how to handle exports from Jewish settlements in the occupied territories is expected later this month. Israeli officials are vowing to boycott EU imports to Israel in response to any sanctions, and asserting that any effort to complicate exports from settlements would backfire on the Palestinians - several thousand of whom work in agriculture and at factories on West Bank settlements.
Mr Netanyahu said that, were the EU to restrict imports from settlements, it would prove itself "a one-sided player" in the region, and this would "put an end to any attempts of the EU to play a facilitating role in the peace process."
Apart from the dispute with the EU, Mr Netanyahu was also dealing yesterday with the latest flareup in the ongoing saga concerning the mental health of his wife Sara - long reported to suffer for fits of jealousy, to pick fights with her domestic staff and her children's nannies, to throw tantrums in TV studios, and more.
An article in the New Yorker magazine has now quoted Mr David Bar-Illan, a senior adviser to and close friend of the prime minister, describing Sara as "not the most stable woman in the world . . . Now she only appears at the appropriate things, receptions for children, things for the retarded or the disadvantaged. And it works . . . it's under control."
Mr Bar-Illan, under pressure to resign, denied making this and several other deeply unflattering remarks about Sara. But the New Yorker is standing by the story, and Mr Bar-Illan is said to have made other nasty comments about Sara in other circumstances.