Luxembourg drops approval for Israel bonds issue: What that means

Luxembourg is not renewing its authorisation for the issue of Israel bonds since it expired on Monday, leaving Israel with an uncertain future over its ability to borrow via investors in European markets.

Last month, Luxembourg’s Finance Minister Gilles Roth told broadcaster RTL that the financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), had decided in May not to renew approval for the bond prospectus beyond its August 31 expiry date.

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A bond prospectus is a legal document that gives investors detailed information about a bond and its issuer before it is launched onto the market. It is produced under the supervision of the financial market within which the bonds are issued – in this case, Luxembourg.

Here’s what we know.

What are Israel bonds?

Israel bonds, issued through the Development Corporation for Israel (DCI), are debt securities by the State of Israel that represent a loan from an investor to the Israeli government. Investors earn interest on the bonds they have bought.

Capital raised via Israeli bonds is not earmarked for specific purposes but forms part of the Israeli government’s overall financing, which means it can be used to fund defence and military spending.

Following the October 7, 2023 Hamas-led attack on southern Israel and the subsequent launch of Israel’s genocidal war on Gaza, the Israeli government increased its military financing, and Israel Bonds were marketed worldwide as opportunities to “support Israel at War” in the same year. According to Amnesty International, the country raised $4.5bn on international markets through the sale of these bonds between October 2023 and January 2025.

Israel Bonds issued in the European Union raise about $2.5bn a year, according to Israel’s Ministry of Finance.

Focus on the number of Israeli bonds held by countries in the EU has intensified as Israeli attacks in Lebanon, Gaza and the occupied West Bank continue, and has given rise to what critics say are inconsistencies in countries’ approach to the plight of Palestine.

In the same month that Luxembourg took over the prospectus for Israel’s bonds, for example, it also recognised the state of Palestine.

Why is Luxembourg involved in this?

Because Israel is not an EU country, Luxembourg’s financial regulator acts as a guarantor for EU investors by approving the prospectus – the legal disclosure document that provides potential investors with information about the bonds’ offering and their issuer before they are sold.

Ireland had previously served as the regulatory home for Israeli bonds after the United Kingdom, which had held the position before that, left the EU in 2020.

Following sustained pressure from parliamentary and civil society groups over Israel’s genocidal war on Gaza, Ireland’s Central Bank Governor Gabriel Makhlouf confirmed last September that his country would not renew its approval.

Luxembourg then took over approval of the prospectus.

But CSSF Director General Claude Marx told RTL last month that it would not be approving the prospectus for another year, saying it would “circumvent the European rules” to accept transfers of the prospectus for consecutive years.

However, the European Securities and Markets Authority (ESMA) told the Luxembourg Times earlier this month that it does allow consecutive permit transfers.

“Yes, a national competent authority can accept the transfer of the approval in two consecutive years,” a spokesperson said, stressing that they were commenting on the general application of the regulation.

What does this mean for Israel?

With Luxembourg no longer approving the prospectus, Israel will now need to persuade another EU country to take over if it wants to continue issuing bonds in the EU market.

It currently remains unclear which country might be prepared to do so.

In the meantime, Israel still has access to other markets around the world to issue bonds – notably its major ally, the United States. Since 1951, the DCI has raised billions of dollars via bonds in the US financial market – about $2.5bn a year.

What pressure has there been on countries issuing Israeli bonds?

In July, Amnesty International called on Luxembourg, Ireland and all EU member states to stop the sale of Israeli bonds or “risk complicity in Israel’s ongoing genocide against Palestinians in the Gaza Strip”.

In a public statement, Steve Cockburn, the regional director for Europe at Amnesty International, said Israel has become “increasingly reliant on foreign investments to finance its genocide, apartheid and unlawful occupation and bankroll its crimes against Palestinians”.

“Israel Bonds increase the funds available to the government and thereby help finance Israel’s genocide against Palestinians in the occupied Gaza Strip that has wiped out entire families, levelled civilian infrastructure, including hospitals and schools and left 90 percent of the population forcibly displaced with their homes in ruins,” he said.

“Allowing these bonds to be sold in the EU markets comes with an enormous ethical and legal cost. International law is clear: All states have an obligation not to aid or assist in genocide and the obligation to prevent it,” Cockburn added.

Amnesty International added that from 2022 to 2024, the budget for the Israeli army grew from 4.2 percent to 8.3 percent of Israel’s gross domestic product (GDP).