Europe gives $10 to a project in Tel Aviv. This project gets $2 less from Israel and the $2 is used to 'compensate' the territories. The project got $8 instead of the $10 it was supposed to get. There's no loophole. Israel chooses to punish productive Israelis to support the Israelis. This is something the Europeans can't control.
Police disperse hundreds in brawl in Kafr Manda, northern Israel (Haaretz)