Luxembourg closes the door on issuing Israel bonds after only one year

In just about a week, Luxembourg's responsibility to assist in the issuance of Israeli government "Israel Bonds" in the European Union will end, and it is unclear how Israel will be able to continue raising this debt in Europe.

According to an official statement by the principality's financial authority, which is a financial center and a member of the European Union and the Eurozone, it has no intention of continuing to approve the prospectuses required by law in the EU in order to offer these State of Israel bonds. The "Bonds" are intended primarily for Diaspora Jews and pro-Israel Jewish organizations, and constitute a minority of Israeli bond issues, but they have been used to raise more than $2.5 billion in the last year, according to Ministry of Finance data.

Replaced Ireland

Luxembourg's announcement is an image embarrassment for Israel, because the principality was chosen only a year ago by the Israeli Ministry of Finance to replace Ireland, where sweeping criticism of Israel's policy in Gaza and the territories led to unprecedented pressure on the Central Bank to stop approving the prospectuses.

Starting September 1, 2026, it is unclear which of the 27 EU countries will be the one to approve prospectuses allowing debt raising through these non-marketable government bonds. The Central Bank of Ireland told the country's media that it had not received a request from Israel to return and approve prospectuses as of last week.

What are "Israel Bonds"?

"Israel Bonds" are bonds of the Government of Israel, the proceeds of which are used by the Ministry of Finance to develop the country's economy. They are offered primarily to Jewish communities and organizations in the Diaspora to strengthen the connection between the Diaspora and Israel.

Unlike marketable bonds, there is no possibility to sell the Bonds on a secondary market, and there is a minimum investment required. Interest rates on the Bonds are higher than those offered on Israel's marketable bonds; for example, the interest rate on dollar bonds of the Jubilee series for 10 years is 5.9%, compared to 3.8% for government bonds traded in Tel Aviv.

Political Context

After Brexit, the underwriting process moved to Ireland. However, following the Hamas massacres on October 7, 2023, and the war in Gaza, public opinion in Ireland became hostile towards Israel. In December 2024, Israel closed its embassy in Dublin.

In an attempt to preempt the blow, Israel moved the approval of the prospectuses to Luxembourg. The decision was made in August 2025 by the then Accountant General, Yahli Rotenberg, who saw it as an opportunity given Luxembourg's centrality as a global financial center. However, a year later, the authority announced it refuses to continue with this arrangement.

Technical Reasoning

The reasoning given by the Luxembourg authority was technical, claiming that according to its interpretation of EU laws, it cannot accede year after year to a request to replace another country. However, when the Luxembourg Times approached the European regulator (ESMA), it stated that "there is no obstacle to accepting such a request year after year."

The Israeli Ministry of Finance reported in response: "The debt management policy is based on a wide variety of raising channels in local and international markets. As has been proven since the beginning of the war, the Accountant General's Division is prepared to finance all government activity in full, relying on a deep and liquid local market and excellent access to global markets. The extensive debt raisings of over 700 billion shekels since the outbreak of the fighting reflect the strong confidence of investors in the stability and strength of the Israeli economy."