In the aftermath of the European Union's decision last month to issue guidelines on labelling Israeli products from outside the pre-1967 border lines, Prime Minister Benjamin Netanyahu instructed the Foreign Ministry to suspend engagements with the EU over all matters related to the diplomatic process with the Palestinians.

It is not clear exactly what form the suspension will take, especially as Israeli diplomats stressed that Israel would continue to discuss these matters with major members of the EU such as the UK, Germany and France.

It is expected that the main impact will be on relations with the EU's foreign service itself and with a number of countries within the union that have been more active on pressing for sanctions against Israel and for the recognition of Palestinian statehood.

Some Israeli diplomats said that this may amount to little more than a period of "reassessment" and, after that it would be back to "business as usual".

Israel's main concern now is the "overzealous" implementation of the labelling guidelines that could lead to removal of Israeli products from shelves on the continent. This happened - temporarily - two weeks ago at the KaDeWe department store in Berlin.

Other moves by the EU are not expected for now. However, the French government is considering a UN Security Council resolution on settlement building.

Despite Mr Netanyahu's announcement, on Monday he met the EU's foreign affairs high representative Federica Mogherini on the margins of the climate summit in Paris.

Ms Mogherini asked Mr Netanyahu for clarifications and, while his answer was not made public, a EU spokesperson said afterwards that the EU-Israel relationship was "good, broad and deep" and that the EU would "continue to work on the peace process, in the Quartet, with its Arab partners and with both parties."