Europe's Carrot-and-Stick Approach to Israel Includes Blacklisting Hezbollah BRUSSELS - At the end of a week when the European Union slapped Israel with financing restrictions to push it to resolve its conflict with the Palestinians, major European powers on Friday stepped up pressure to give Israel one of its long-sought demands: designating the Lebanese militant group Hezbollah as a terrorist organization. Sharif Karim/Reuters Hezbollah's leader, Hassan Nasrallah, addressed supporters in Beirut's southern suburbs on Friday by video conference during the Islamic month of Ramadan. The timing of the carrot-and-stick actions was coincidental, but they illustrated the bloc's strategy of pushing forward with its own efforts to rein in Israeli actions that undermine the Middle East peace process - and to maintain good relations with Israel, understanding its unique security needs. The approach has leading member states like Britain and France making a renewed effort to navigate deep divisions within the Union over the Middle East peace process, in which the United States" role has long eclipsed that of the Union. It may continue to do so. Analysts said the moves by Europe were unlikely to be a game changer in the region, a conclusion seemingly underlined on Friday when Secretary of State John Kerry announced possible Israeli-Palestinian talks in Washington as early as next week. On Friday, the Union went ahead with publishing new guidelines banning the financing of, or cooperation with, institutions in territories seized by Israel in the 1967 war, despite an intense Israeli effort to stop them, including phone calls by Prime Minister Benjamin Netanyahu to a half-dozen European heads of state and consultations with envoys from the British, French and German missions in Israel. "We can't accept the guidelines as they are now," said a senior Israeli official who described himself and other officials as being engaged in "the European war" this week over the guidelines "They are imposing things we cannot accept." At the same time, Britain is leading the effort to impose sanctions against Hezbollah after a terrorist attack in Bulgaria a year ago that killed five Israeli tourists and their Bulgarian driver, and the conviction in March of a Hezbollah operative in Cyprus for plotting a similar attack. "There are still some reservations," a senior Union official said on condition of anonymity because private talks between the bloc's governments were continuing. But "we are moving in the end towards what could be a listing of the military movement." A decision to put Hezbollah on the terrorist list will require the unanimous consent of the bloc's 28 members at a meeting of foreign ministers here on Monday. If such an agreement is reached, the sanctions would eventually consist of travel bans and asset freezes, Union officials said, adding that more time would be needed to come up with precise terms. Israel and the United States, which already brand Hezbollah as a terrorist organization, are pressing hard for the Union's member states to follow suit. The Union is Israel's largest trading partner, covering $40 billion annually - one-third Israeli exports and two-thirds European. But the political relationship is much more complicated, shrouded by memory of the Holocaust and continuing concern over anti-Semitism in many countries. A number of European countries like Ireland and Austria, which has peacekeepers in the Golan Heights, are wary of destabilizing Lebanon by cracking down on militant elements like Hezbollah, and of eroding their own influence on events there. The publication of the Union guidelines met with particular fury among Israelis like Finance Minister Yair Lapid, the leader of a party whose largely wealthy, secular constituency is particularly concerned about the prospect of isolation from Europe. Mr. Lapid said in an interview on Israeli television Friday night that the new guidelines were not "just hypocrisy" but "stupidity," adding, "If they care about peace, they're damaging it." Mr. Lapid said militant Palestinian groups were pressuring President Mahmoud Abbas of the Palestinian Authority to refrain from negotiations with Israel by "saying to him, "Wait, wait, Israel is being isolated. That isolation is mounting." " The European Union, he said, "has gone on to serve those most radical forces in Palestinian society." James Kanter reported from Brussels, and Jodi Rudoren from Jerusalem. Steven Erlanger contributed reporting from Paris, and Michael R. Gordon from Amman, Jordan.