The powerful Lebanese Shi'ite movement, an ally of Iran, has attracted concern in Europe and around the world in recent months for its role sending thousands of fighters to support Syrian President Bashar al-Assad's government, an intervention that turned the tide of a two-year-old civil war. Britain and the Netherlands have long pressed their EU peers to impose sanctions on the Shi'ite Muslim group, citing evidence it was behind an attack in the coastal Bulgarian city of Burgas a year ago, which killed five Israelis and their driver. Until now, many EU governments had resisted lobbying from Washington and Israel to blacklist the group, warning such a move could fuel instability in Lebanon and add to tensions in the Middle East. Hezbollah functions both as a political party that is part of the Lebanese government and as a militia with thousands of guerrillas under arms. Lebanese caretaker Foreign Minister Adnan Mansour said the decision was "hasty" and could lead to further sanctions against the movement that would complicate Lebanese politics. "This will hinder Lebanese political life in the future, especially considering our sensitivities in Lebanon," he told Reuters. "We need to tighten bonds among Lebanese parties, rather than create additional problems."
The blacklisting opens the way for EU governments to freeze any assets Hezbollah's military wing may have in Europe.
"It is good that the EU has decided to call Hezbollah what it is: a terrorist organization," Dutch Foreign Minister Frans Timmermans said on the sidelines of a meeting of EU foreign ministers who decided on the blacklisting.
"We took this important step today, by dealing with the military wing of Hezbollah, freezing its assets, hindering its fundraising and thereby limiting its capacity to act."
By limiting the listing to the armed wing, the EU was trying to avoid damaging its relations with Lebanon's government.
Hezbollah does not formally divide itself into armed and political wings, and Amal Saad Ghorayeb, who wrote a book on the group, said identifying which figures the ban would apply to would be difficult.
"It is a political, more than a judicial decision. It can't have any real, meaningful judicial implications," she said, adding it appeared to be a "a PR move" to hurt Hezbollah's international standing, more connected with events in Syria than with the case in Bulgaria.
Israel's deputy foreign minister Zeev Elkin welcomed the decision, but expressed disappointment only the armed faction was included.
"We (Israel) worked hard, along with a number of countries in Europe, in order to bring the necessary materials and prove that there was a basis for a legal decision," Elkin told Israel Radio.
Hezbollah parliamentary member al-Walid Soukariah said the decision puts Europe "in confrontation with this segment of people in our region."
"This step won't affect Hezbollah or the resistance. The resistance is present on Lebanese territory and not in Europe. It is not a terrorist group to carry out terrorist attacks in Europe, which is forbidden by religion."
The Iran-backed movement, set up with the aim of fighting Israel after its invasion of Lebanon three decades ago, has dominated politics in Beirut in recent years.
In debating the blacklisting, many EU governments expressed concerns over maintaining Europe's relations with Lebanon. To soothe such worries, the ministers were expected to issue a statement pledging to continue dialogue with all Lebanese political groups and to maintain financial aid to Beirut.
Already on the EU blacklist are groups such as Hamas, the Palestinian Islamist movement that rules the Gaza Strip, and Turkey's Kurdish militant group PKK.
Their assets in Europe are frozen and they have no access to cash there, meaning they are blocked from raising money for their activities. Sanctions against Hezbollah will go into effect later this week.
Hezbollah denies any involvement in last July's attack in Bulgaria. The Bulgarian interior minister said last week Sofia had no doubt the group was behind it.
"We should name names because time has come to tell the truth," Lithuanian Foreign Minister Linas Antanas Linkevicius said before Monday's meeting. Vilnius holds the rotating presidency of the European Union in the second half of 2013.
In support of its bid to impose sanctions, Britain has also cited a four-year jail sentence handed down by a Cypriot court in March to a Hezbollah member accused of plotting to attack Israeli interests on the island.
The decision also comes at a time of strained relations between the EU and Israel after Brussels pushed ahead with plans to bar EU financial aid to Israeli organizations operating in the occupied Palestinian territories.