Israeli officials say EU spat resolved on funding institutions operating outside 1967 borders

Israeli officials say they have resolved a diplomatic spat with the European Union over a funding ban on institutions that operate in occupied areas claimed by the Palestinians.

The dispute has shaken Israel's relations with Europe and drawn attention to Israel's much-maligned policy of building settlements in the West Bank and east Jerusalem.

The guidelines apply to an EU program that is set to offer Israel hundreds of millions of euros to promote scientific research. Israel had feared the guidelines would make it ineligible for these funds.

Three Israeli officials said a compromise was reached but refused to give details.

The officials spoke on condition of anonymity pending a formal announcement. The EU could not immediately be reached for comment.