BRUSSELS

The European Commission has urged Israel to refrain from any action that could trigger the collapse of the Palestinian Authority, following Israel's instruction to cancel the waiver that allows Palestinian banks to cooperate with the Israeli financial system.

At the European Commission's midday briefing in Brussels, spokesperson Anouar El Anouni said that Israeli Finance Minister Bezalel Smotrich's move risks severing Palestinian banks from the Israeli financial system, which the Palestinian economy heavily depends on for processing Israeli shekel transactions in the West Bank.

El Anouni warned that if the decision is confirmed, it will have an immediate negative impact on the EU's ongoing support to Palestinian citizens and the Palestinian Authority's reform agenda, potentially harming essential public services and regional stability.

"The EU calls on Israel to revert this decision immediately and to refrain from any action that could lead to the collapse of the Palestinian Authority," he said.

Earlier today, Smotrich ordered the end of legal immunity for Israeli banks working with Palestinian banks, according to the ministry.

Israeli banks depend on an annual government guarantee to avoid legal prosecution when transacting with Palestinian banks, and this move would effectively halt these financial operations.

The decision is part of broader Israeli measures aimed at pressuring the Palestinian economy, including withholding tax revenues.