Europe maintains a nuanced position, preserving strong economic and political ties to Israel, while expressing firm opposition to Israeli settlements in the occupied Palestinian territories and recognition of how those settlements violate the Geneva Conventions, numerous United Nations resolutions and other instruments of international law. The Euro-Israeli Association Accord, for instance, privileges European-Israeli trade by removing tariffs for all goods made in Israel. But the Accord has been the basis of a challenge by the European Union to Israel's practice of labeling goods produced in Israeli settlements in the occupied territories as "made in Israel" and including them as tariff-free in violation of the Accord's provisions.
While Europe was invited to the 1991 Madrid peace talks, it was functionally excluded; the U.S. alone set the terms, developed the agenda and recruited the participants. During the Oslo process, the European Union was called on to pay much of the cost, but remains excluded from serious involvement in the actual diplomacy. European governments throughout the Clinton era appeared to acquiesce to U.S. domination over Middle East diplomacy. Despite his claimed commitment to "assertive multilateralism" as the bulwark of his foreign policy, Clinton never relinquished even partial control of the Israel-Palestine peace process to the Europeans_and Europe never pushed very hard for a seat at the table. In the mid-1990s the European Commission drafted a long critique of U.S. policy towards the Israel-Palestine conflict, and especially of Europe's exclusion from the process. But the report concluded with the statement that nothing in it should be taken as a "challenge to U.S. leadership" on the issue, thus largely vitiating the critique's impact.
When George Bush was elected, European diplomats were wary of the seeming disinterest of this oil industry-oriented administration in the explosive region. By summer 2001, the EU was already moving in where Washington feared to tread. European diplomats helped negotiate an end to Israel's two-day tank-led occupation of the Palestinian town of Beit Jala in August. The EU's security chief, Javier Solana, shuttled between Israeli and Palestinian officials, attempting to broker a new cease-fire. Then, when a new crisis erupted involving Israel's shutting down the Orient House, long the Palestinians' diplomatic center in East Jerusalem, Europe, in particular Germany, moved in. Even the White House acknowledged that the Israeli action represented an "escalation" of the occupation. German Foreign Minister Joschka Fischer happened to be in the region at the time, and quickly moved to the center of the diplomatic effort to reopen the Palestinian offices.
After urging that Israel reopen Orient House, Fischer invited the parties to meet in Berlin to open a new dialogue. But he undermined his own position with a careful bow to what he called "the American prerogative" in Middle East diplomacy. His initiative might have borne fruit; but just a few days later, the terrorist attacks of September 11th occurred, and Europe pulled back.
Only months later, when the post-9/11 global diplomatic impasse slowly began to crumble, did Europe begin to revive its cautious efforts. With Israel's violent re-occupation of Palestinian cities in the spring of 2002, most of the European-funded security infrastructure of the Palestinian Authority (police stations, police cars, etc.) were destroyed by Israeli soldiers. Israel made clear its expectation that Europe, not Israel itself, should be expected to cough up the funds to rebuild the shattered infrastructure.
By the autumn of 2002, with the Oslo process collapsed, it remained uncertain whether Europe, perhaps in alliance with other countries or groups of countries, would be prepared to challenge the U.S. "prerogative" and move to initiate a new diplomatic process based on the centrality of the United Nations. In fact, Israel's repeated attempt to close the Orient House and seize the documents and equipment met hardly any external challenge in August 2002.