Israel agreed to discuss the economic situation of Palestinians in the West Bank and Gaza with the EU next September, on the condition that the settlements issue is not brought up, Israeli daily Haaretz reported.
"Israel told the European Union last week that it is willing to open talks about the economic situation in the West Bank and Gaza," the newspaper quoted an anonymous Israeli official as saying.
"The EU wanted to discuss settlement construction and steps that might jeopardize the two-state solution," the senior official said.
"Israel has made it clear that it is only ready to negotiate improving the economic situation in the West Bank and Gaza Strip," he added.
He also pointed out that Israel would be willing to discuss issues raised by the European Union in the past, including infrastructure projects for Palestinians living in Area C regions in the West Bank, which are under full Israeli civil and security control.
The official added that the first round of talks regarding the economic situation in West Bank and Gaza is scheduled for next September.
International law considers the West Bank and East Jerusalem as "occupied territories," and all Jewish settlement building on the land illegal.
Around 500,000 Israelis now live in more than one hundred Jewish-only settlements built since Israel occupied the West Bank and East Jerusalem in 1967.
The Palestinians want these areas, along with the Gaza Strip, in order to establish their future state.