Luxembourg fund’s announcement came as German chancellor Angela Merkel pledged to oppose “boycotts” targeting Israeli settlements.
Europe is paying for services that Israel is legally obliged to provide as the occupying power.
“Germany will set an example for the rest of the world,” Israeli foreign ministry warns.
Ambassador’s comments come as reports emerge that Israeli banks are facing more pressure from European pension funds over their role in illegal colonies.
Guidelines on ending grants to firms active in the occupied West Bank do not go far enough.
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