EU seeks schemes to prop up Palestinian Authority

By Andrew Beatty

Date: 11/05/06

Foreign ministers will discuss on Monday (15 May) how to set up a mechanism to fund the Palestinian people to prevent the collapse of essential services, while at the same time bypassing the Hamas government.

The EU has been tasked by the UN, Russia and the US with spearheading work on such a mechanism, which would cover an initial period of three months.

Diplomats said that setting out the details of the mechanism was likely to take weeks rather than days. "We have not done this before," remarked one diplomat.

It is not yet clear if under this mechanism the money would be channelled through an international organisation such as the World Bank, as discussed since Palestinian elections in January.

"We would certainly like the World Bank to be involved in some capacity," said Commission spokes-person Emma Udwin.

The debate is expected to focus on what the EU funds will pay for - with healthcare, education and salaries for civil servants being mentioned as possible areas.

The Commission is likely to press for the mechanism to channel funds to end recipients, rather than through Palestinian President Mahmoud Abbas, who may serve as an "interface".

"We are not interested in setting up parallel structures," said Udwin.

The Middle East Quartet - the EU, the UN, Russia and the US - has vowed to give no money directly to the Hamas government before it takes steps toward recognising Israel's right to exist and committing itself to non-violence.

The EU, the largest donor to the Palestinians, suspended its direct budgetary assistance to the Palestinian Authority in April following the formation of the Hamas government.

It has now been two months since many civil servants' salaries have been paid, raising fears of unrest and the collapse of the security services and essential services.

Countries in the region, such as Iran, have not come forward with sufficient funds to allow wages to be paid. According to some estimates 165,000 salaries remain unpaid.

Recent fighting between Hamas and Fatah factions has prompted further warnings that the Palestinian Authority may be approaching a civil war.

As Israel has backed the proposals, officials hope that the mechanism will allow the transfer of Palestinian value-added tax (VAT) receipts collected by Israeli customs, which are worth an estimated EUR 40 million each month and which the EU has said Israel is under a legal obligation to transfer.

Diplomats said Israeli support was crucial in securing US backing, after initial reluctance in Washington to the plan.

US agreement came during a meeting of the Quartet on Tuesday (9 May) in New York, which was held with the participation of the Egyptian, Jordanian and Saudi Arabian foreign ministers.

But diplomats said privately that the US was unlikely to use the mechanism, as Washington continued to shy away from transferring funds directly to the Palestinians.

On Tuesday the US pledged around EUR 8 million of aid in the form of medicines and supplies.

Palestinian President Mahmoud Abbas will next week (16 May) address the plenary of the European Parliament in Strasbourg and will meet the assembly's political leaders.

• Foreign ministers are also expected to discuss on Monday the next steps on Iran's nuclear programme and possible UN sanctions, which continue to be opposed by China and Russia.

Preview of the General Affairs and External Relations Council on 15 May 2006, where EU Foreign Ministers were to discuss how to set up a mechanism to fund the Palestinian peoplel. The aim was to prevent the collapse of essential services, while at the same time bypassing the Hamas government.

• Primary Source

EEAS: Countries: Israel http://www.eeas.europa.eu/israel/index_en.htm

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