Hamas-Fatah clashes imperil EU reprieve

The EU is to discuss next month whether to resume direct funding to the Palestinian government after a 13-month suspension.

Speaking after a meeting of EU foreign ministers and representatives of the Arab League in Brussels on Monday (14 May), EU External Relations Commissioner Benita Ferrero-Waldner hinted that efforts by the Palestinian Finance Minister Salam Fayyad to establish a central government account could open the way to resuming direct funding from the EU.

She said his efforts could be discussed when foreign ministers meet in Luxembourg next month.

But the prospects for direct aid have been threatened by a resurgence of fighting in the Gaza Strip between Hamas and Fatah, the two main factions now in the Palestinian government.

Speaking in Brussels after a meeting with Palestinian Foreign Minister Ziad Abu Amr on Tuesday (15 May), EU foreign policy chief Javier Solana said that security was essential to political progress. "It would be very difficult to move forward politically if the situation internally among the Palestinians is not guaranteed," he said.

The same day eight Palestinians were killed in an ambush that Fatah blamed on rival Hamas fighters.

The EU stopped giving direct aid to the Palestinian Authority in April 2006 after Hamas won the Palestinian elections. The EU classifies Hamas as a terrorist organisation. It set up a temporary international mechanism to bypass the government, transferring funds directly to the bank accounts of public servants and other individuals.

The EU said it would not resume government funding unless the government renounced violence, accepted previous peace agreements and recognised Israel.

But after the formation of a coalition Hamas-Fatah government in March 2007, the EU indicated that it might be willing to work with individual ministers who meet these demands.

In tandem, Fayyad - considered a moderate by the EU and the US - has been working to develop a system to ensure that funds are not diverted to terrorists, which is reportedly almost ready.

Ferrero-Waldner welcomed what she said were positive moves towards developing the new mechanism but added: "There are some technical conditions that still have to be met, which as we see it have not yet been met."

EU diplomats said that the details of the plan will be essential to its success, particularly questions about who will have access to the fund and who will control it.

US backing will also be essential as many commercial banks, which would transfer the funds, are unwilling to jeopardise their North American operations by falling foul of US law.

But EU officials are hopeful that Fayyad’s mechanism can provide a way out of the current impasse, amid concerns about the impact of diverting funds away from the central government.

Although the EU has paid ‘allowances’ directly to Palestinian medical staff, allowing hospitals to stay open, the Palestinian government has struggled to pay the salaries of members of the security services and police.

The World Bank and other international organisations have warned that the Palestinian economy is on the verge of collapse.

But speaking on Monday, the EU’s foreign policy chief Javier Solana defended the EU’s decision to stop payments going directly to the Palestinian coffers.

EU officials claim there has been a 20% increase in funding to Palestinians over the last year, despite the suspension.

But the EU position was sharply criticised by Abu Amr. Speaking in Brussels on Tuesday (15 May), he called on the international community to end the "political and financial seige".

The EU is to discuss next month whether to resume direct funding to the Palestinian government after a 13-month suspension.