EU struggles with Palestinian dilemma
BBC Website - 15 March 2006
The attacks on EU offices in Gaza have sharpened the European Union's dilemma over whether to continue funding the Palestinian Authority under a Hamas-led government.
The EU has been the biggest single donor to the Palestinian Authority (PA), but Hamas is on its list of terrorist organisations.
It cannot support terrorism, but neither does it want to trigger the PA's financial collapse.
The violence that followed Israel's raid on the Jericho prison on Tuesday makes the problem even more hard to handle.
As external affairs commissioner Benita Ferrero-Waldner said on Tuesday, it "puts us all in a very difficult position".
She told reporters that the Palestinian President, Mahmoud Abbas, whom she met briefly in Strasbourg before he rushed home to deal with the crisis was "absolutely aware" of this.
But she refused to be drawn on whether the EU would use his office as a conduit for funds, bypassing Hamas, as some European politicians have suggested.
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In 2005, the EU earmarked 279 million euros ($325m, £192m) in funding for the PA. Not all of it was handed over, because the money is linked to specific reforms, and the European Commission judged the Palestinian Authority was not doing enough in some areas.
If funding from member states is included, the Palestinian Authority receives 500 million euros ($600m) a year from the EU.
After Hamas' election victory, Israel stopped transferring customs duties - about $50m a month - to the Palestinian Authority. But two weeks ago, the international envoy to the Middle East, James Wolfensohn, warned that the PA was on the verge of collapse.
So the EU decided to release around 120m euros ($140m) in funding for the caretaker government. Of that, only 17.5m euros ($21m) is going directly to the Palestinian Authority, because of EU concern about corruption and the lack of reform.
The rest will go to the UN Relief and Works Agency (UNRWA), which works in the Palestinian territories, and to the PA's fuel and electricity suppliers.
That money will pay the bills for now. But in the longer term, the EU is setting three conditions if it is to continue funding the PA under Hamas.
First, Hamas must renounce the use of violence. Secondly, it must recognise the state of Israel. Thirdly, it must abide by existing peace agreements.
So far, Hamas has not accepted the EU's conditions.
But the EU has to take a number of factors into consideration. From a humanitarian perspective, the EU estimates half the Palestinian people are living in poverty. Fifteen per cent can't even meet subsistence needs.
Also, if the EU stops funding the Palestinian Authority, it risks losing its negotiating power. And if the EU does pull out, then who might take its place? The most likely candidate is Iran: not a prospect likely to please the EU.
The British Labour MEP Richard Howitt has just got back from two weeks in the Palestinian territories, where he had meetings with Hamas, among others. He says the EU should consider all the alternatives, including channelling funds through Mr Abbas or international organisations, such as UNRWA.
While he condemns the attacks against EU offices in Gaza, he envisages very serious consequences if the EU withdraws funding for the PA.
"This is a very clear warning," he says. "We are on the brink of the collapse of the Middle East peace process."
But Charles Tannock MEP, foreign affairs spokesman for the UK Conservatives in the Parliament, says the EU should not fund a Palestinian Authority under Hamas because Hamas will not recognise existing peace agreements.
And he opposes any suggestion to use Mr Abbas as a conduit for funds.
"The Palestinian Authority is vastly bloated and corrupt," he says. "We would be paying salaries to cronies of Mr Abbas. I'm not saying we should stop paying water or utility bills for the Palestinian Authority, but Mr Abbas' record as president is disappointing."