Israel Threatened with Becoming a Pariah State as Europe Considers Canceling Trade Agreement

SadaNews - Israel is experiencing a critical diplomatic and economic moment as European and international pressures mount, with the European Union considering for the first time since the signing of the partnership agreement to suspend or cancel the free trade agreement, while recognition of Palestine is expanding to include major powers such as Britain, France, Canada, and Australia.

Reports from the Israeli newspapers "The Marker" and "Calcalist" paint a grim picture of the situation, with a direct threat to commercial status, a decline in international support, and an increasing reliance on U.S. President Donald Trump's administration.

According to The Marker, the fate of the trade relationship hinges on voting within EU institutions, where Italy represents the crucial element; Prime Minister Giorgia Meloni has been harshly critical of Israel, announcing her support for European sanctions, placing Tel Aviv at risk of losing its largest trading partner, the European Union.

On the other hand, Calcalist noted that 156 countries, including three from the G7, recognize Palestine, considering this a strategic shift that weakens the Israeli narrative and strengthens the Palestinian position internationally, while the chances for normalization with Saudi Arabia, which tied any agreement to a halt in the Gaza war, have diminished.

These developments, both newspapers confirm, herald a growing isolation for Israel and strategic losses that may continue in the long term.

Direct Threat to Trade Agreement with Europe

"The Marker" reported that Israeli foreign, economic, and finance circles are in a state of anxiety regarding the EU vote on canceling the free trade agreement with Israel, which forms a fundamental pillar of trade exchange.

The newspaper indicates that the agreement allows goods to pass without customs duties and its cancellation would directly lead to imposing tariffs ranging from 3% to 6% on Israeli exports.

Italy has been described as the "decisive voice," as Prime Minister Giorgia Meloni hinted in her speech before the United Nations General Assembly that she would not support a complete cancellation but accused Israel of having "exceeded reasonable limits and violated humanitarian standards," confirming that her country would support "some European sanctions on Israel."

According to" The Marker", it can be understood from Meloni's speech that Italy may oppose Israel's complete expulsion from the trade agreement and from European funding programs, but would support sanctions against officials and settlers.

The report points out that Europe represents Israel's largest trading partner, with trade volume exceeding $50 billion annually.

Therefore, any damage to the agreement would inflict a deep wound on the Israeli economy and label it as "the partner tainted by human rights violations," which is enough to deter global companies from dealing with Tel Aviv.

Wave of Recognition for Palestine

Conversely, Calcalist reveals a rapidly accelerating diplomatic wave that doubles Israel's isolation, as countries like Britain, Canada, Australia, Portugal, France, Belgium, Luxembourg, Monaco, and Malta announced their official recognition of the Palestinian state, joining 156 countries out of 193 in the United Nations, almost 80% of the international community.

The newspaper clarifies that this recognition is not limited to a symbolic aspect but provides Palestinians with new legal tools to pursue Israel in international courts, enhancing their chances of joining international organizations and obtaining direct funding from countries and institutions.

More dangerously, according to Calcalist, three countries from the G7 - France, Britain, and Canada - have broken the traditional alignment in favor of Israel, while the United States, Germany, Italy, and Japan remain hesitant.

The participation of countries of such weight in the recognition opens the door to what the newspaper described as the "contagion effect," which may translate into decisions in major organizations such as the OECD or the World Bank.

Loss of Arab Depth and Increasing Dependence on Trump

Calcalist's report suggests that the Saudi position deepens Israel's predicaments even further, as Riyadh has openly aligned this year with the condition of establishing a Palestinian state in return for any potential normalization, after Tel Aviv's estimates relied on a deal that ignores the Palestinian issue.

The newspaper described Saudi Crown Prince Mohammed bin Salman as "leading the Arab camp rejecting any opening to Israel amid the war on Gaza."

As for the American side, the same newspaper indicates that Israel has become "completely dependent on Trump," who promised at the United Nations to use the veto power to obstruct any recognition of Palestine in the Security Council, but he approaches foreign policy with a deal-making mentality, meaning his support may tomorrow turn into a tool for political or economic blackmail.

Wide Economic and Financial Implications

Analysts quoted by Calcalist warn that the risks do not stop at official sanctions but extend to global markets, as major banks, insurance companies, and investment funds have begun updating risk models, placing Israel in the "high-risk economy" category due to international discontent; this impression raises borrowing costs and reduces foreign direct investments.

The newspaper asserts that even if European sanctions are not implemented immediately, the mere discussion of them is enough to generate "regulatory risks" that translate into a higher risk premium on Israeli bonds and projects, further increasing pressure on the local economy, which is already struggling with the slowdown and the massive costs of the war on Gaza.

Growing Isolation and Narrowing Options

Analysis from "The Marker" and Calcalist concludes that Israel is rapidly moving toward suffocating isolation, with the European Union threatening to cancel its trade privileges, the G7 witnessing a dangerous division regarding its support, and Saudi Arabia closing the door on any normalization deal without a Palestinian state; meanwhile, Tel Aviv has only the option of near-total reliance on Trump's support, with all its fluctuations.

This situation, according to both newspapers, indicates not only a current political crisis but also a negative strategic trajectory that may turn Israel from a desired international partner into a pariah entity economically and diplomatically.

Source: Israeli Press