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The theater where the festival was originally set to be held attributed its decision to a wave of harassment against its staff.
The lawsuit challenged former Barcelona mayor Ada Colau's suspension of relations with Israel.
The new municipality of Barcelona has restored the twinning agreement with Tel Aviv, and the official boycott against Israel has been put to an end.
Barcelona's status as Tel Aviv's twin city had been suspended in February due to Israeli "apartheid," but the new mayor has reinstated them.
This news comes right after Wizz Air airline announced that it would stop operating flights on the route.
Saturday headliners were Kendrick Lamar; Rosalia, the Spanish young phenomenon; and St. Vincent.
She was defeated by Xavier Trias, the right-wing candidate from the Junts party, a former mayor who Colau had previously unseated in 2015.