FPC Report

EU Funding of the Palestinian Authority

The European Parliament Working Group Report Raises More Questions Than It Answers

March 2004


In early 2003, 169 members of the European Parliament (27% of the total) submitted a petition calling on the President to set up an investigation into the transfer of funds from the European Commission to the Palestinian Authority (PA). Questions bothering the MEP's included these: Had the money been distributed lawfully? How had it been used? Did the transfers contravene EU law and in particular the EU Treaty which condemns all acts of terrorism, which it defines as "grave intimidation of a population"?

The petition came after allegations in the Parliament that hundreds of millions of Euros had been diverted to purposes (including terrorism and hate-based education) that neither the Parliament nor its executive arm, the Commission, wished to support.

Instead of a formal inquiry, the petition resulted in the Parliament establishing the Working Group on Budgetary Assistance to the PA in March 2003. The Working Group has been meeting at monthly intervals and is chaired on a rotating basis by representatives of three EU committees: Foreign Affairs (Laschet), Budgets (Wynn) and Budgetary Control (Theato).

The very manner in which the Working Group was set up raised serious questions. Some MEPs, referring to the lack of clear powers and authority, claimed there had been a 'whitewash' and that the Working Group would inevitably protect those EC officials and committees who had been responsible for the ongoing flow of funds to the Palestinian political leadership even in the face of mounting evidence of misuse. There were also concerns that, as constituted, the Working Group would be influenced by a perceived need to protect EC officials from the threat of civil litigation by European victims of Palestinian terror.

The Working Group report was issued today. There are two versions, and members were asked yesterday to vote on the report they support. One version, the "majority opinion", is authored by Wynn and Theato, the two budgetary chairmen [Wynn and Theato report]; the second, by the Foreign Affairs Chairman, Laschet [Laschet report]. As it turned out, Laschet's version has the support of many of the proponents of the original petition. "Irreconcilable differences" make it impossible for a single report to be published. The vote on which report to publish could not have been closer: seven for the Wynn/Theato version against six for Laschet.

The Funding for Peace Coalition has reviewed both. Unfortunately, far from clarifying the questions that led to the call for a thorough enquiry, the drafts raise new and troubling questions.

Outstanding Issues

Seventeen new and so-far unanswered questions are presented here in the public interest. We call on the leaders of the European Parliament to urgently address them.

Question 1:

The Wynn/Theato report awards the Palestinian Authority a clean bill of health. In rejecting grave allegations of mismanagement, it was unable to find any evidence of European funding being used for what it calls "illegal activities including the financing of terrorism". It then goes on to stipulate eleven recommendations for the future management of PA financial resources. So which is it? That the Palestinian management of financial aid from the EU is fine? Or that it must be changed?

Question 2:

International aid to the Palestinians since 1993 has been estimated at $10 billion. Nigel Roberts, the World Bank's top official in the region, described it as "the highest per capita aid transfer in the history of foreign aid anywhere". If the Working Group was unable to find evidence of misuse of funds by the Palestinian leadership, does it know where the billions in European aid actually went? If so, it fails to state this in the report. Does the Working Group believe that the funds reached their intended target - the Palestinian people? Entirely? Mostly? Somewhat?

Question 3:

The Wynn/Theato report refers to acts of indiscriminate Palestinian murder of Israeli women, children and other civilians in this way: 'what the IDF [Israeli Defense Forces] define as terrorist activities'. The same describes the perpetrators of these murderous acts as 'martyrs'. [It's instructive that Human Rights Watch, an organisation normally highly critical of Israel, calls such acts crimes against humanity.] In adopting a pro-Palestinian terminology, has the Working Group revealed a deep-seated bias against Israel?

Question 4:

The Working Group set itself a high standard of proof by saying that the only acceptable evidence acceptable would be what it calls "conclusive evidence (i.e., one that could be accepted by a Court in the processing of a case)". On this basis, the Wynn/Theato report categorically denies the possibility of any diversion of funds having taken place. The Laschet report says there is a basis for believing funds have been misused, but says there is a lack of clear proof of the details. "However", says Laschet, there is evidence that payments [to illegal activities including financing of terrorism] have been authorized." Concerned people have a right to be deeply troubled by the way the standard of proof was actually applied in the Working Group's meetings. We are especially bothered by the reported statement of MEP Hannes Swoboda, an outspoken advocate of the Palestinians, who said: "Only if the DNA of the suicide bombers will match the DNA of those who received euros will we accept it as evidence." Does MEP Swoboda's uncontradicted assertion reflect the state of mind of other members of the Working Group? Did his outrageous formulation have a bearing on the determination that evidence of diversion of funds to terrorism is lacking? Do the members of the Working Group actually possess the required legal background to evaluate the probative value of evidence?

Question 5:

The Working Group's terms of reference included the important matter of EU funding of Palestinian schoolbooks containing hate-based incitement against Jews and against Israel. The Palestinian obligation to bring an end to hate-based education is a key obligation in Phase I of the EU-initiated Roadmap to Peace for the Middle East. Laschet makes no comment about this at all. Wynn/Theato says: "The Commission stated that such publications had not been financed by EU funds. Lack of time has not allowed for further investigations." Why is the Working Group silent on this critical issue? Why are there no recommendations regarding Palestinian incitement? (A critique of EU policy on Palestinian hate-based textbooks can be found at

Question 6:

Wynn/Theato says the entire body of factual claims and revelations of Israeli military intelligence was unconvincing and rejects it. Yet the unsubstantiated oral submissions of Palestinian politicians were by and large accepted at face value. Does this not bring into question the very basis of the Working Group's conclusions?

Question 7:

There are important signs of 'insider' revulsion at the financial corruption within the Palestinian hierarchy. The resignation speech of former Palestinian Prime Minister, Mahmoud Abbas, to the Palestinian Parliament last September, for instance, is rich with references to theft from the Palestinian Treasury by 'insiders'. Abbas was not called to give evidence to the Working Group. Given his undoubted hostility to the Israeli case, were his bitter complaints - which touch directly on the matter under review - considered at all by the Working Group? If not, why not? Similar comments were made in March 2004 by Muhammad Dahlan, a former Palestinian cabinet minister. The mayor of Nablus resigned his position last month because of corruption within Arafat's circle. 300 members of Fatah resigned from the organization for similar reasons this month. Did the Working Group pay attention to these voices from within the Palestinian camp?

Question 8:

The Wynn/Theato report 'admits' there is evidence of the preposterously low total of $17,500 being paid to Palestinian terrorists. This admission is evidently made in order to ridicule the much larger allegations. But does this accurately reflect the scale of the problem? A few random instances -

  • The Al-Aksa Brigades are themselves on public record as proudly asserting that they alone receive $50,000 per month from Arafat's presidential budget - a budget directly funded by the EC. No mention of this appears in the Working Group's report. Why not?

  • Press reports make increasingly obvious the extent of corruption within the Arafat leadership. An ongoing and highly publicized investigation by the French authorities into transfers of some $9m in Palestinian Authority funds into the private account of Suha Arafat, the chairman's wife, is unmentioned in the Working Group's report. Do the French authorities also lack credibility?

  • Newspaper reports today (1st April 2004) say that the head of the Palestinian police has been personally pocketing millions of dollars every month by fraudulently paying cash salaries to seven thousand non-existent police officers.

  • Why is corruption on a vast scale so visible to outside observers and so terribly difficult to recognize when you are sitting in Brussels?

    Question 9:

    A September 2003 official report by the International Monetary Fund mentions the unexplained disappearance of $900m in stolen Palestinian assets. It also points to specific deficiencies in EU-funded budgets. Those criticisms are directed at precisely the same Palestinian leaders as those who are the focus of the Working Group. Yet the Working Group makes no mention of either the loss or of the well-documented deficient practices. The IMF being entirely free of a pro-Israel taint, what does this omission say about the determination or ability of the Working Group to get to the heart of the problem?

    Question 10:

    The Wynn/Theto report refers to the IMF's role in approving the PA's basic reporting standards. Similar claims have previously been made in the past by EC leaders, most notably Commissioner Christopher Patten. The Laschet report disavows the claim of IMF approval. The fact is that the IMF itself has repeatedly clarified that it plays no role in monitoring the management of EU funding of the PA. Is the IMF to be believed when it disavows any involvement in monitoring EU aid to the Palestinians, or does the IMF also lack credibility about its own role?

    Question 11:

    The Working Group limited the scope of its investigation to the 246m of Direct Budgetary Aid (DBA). However, by its own account, the EU has channeled some Euro 4 billion to the Palestinians over the past decade. Why was this far larger sum not reviewed? Could a competent, truly-independent audit of the EU-funded budgets win back some part of this vast sum for the benefit of the Palestinian people?

    Question 12:

    Did the Working Group review aid payments made in 2001 and 2002? If yes, why does it devote almost all of its focus and findings to 2003 and onwards, a period during which it claims great improvements were made? Is nothing to be learned from the manner in which funds were delivered prior to 2003 when, by all accounts, those improvements had not happened? Does this point to a cover-up?

    Question 13:

    At a donors' conference in Rome in December 2003, EU representatives demanded that all PA employees be henceforth paid via bank account transfers and not - as has been the practice for years - in cash (which is far more susceptible to corruption and diversion). Despite promises to do so, it is estimated that around 60% of all employees continue to receive payment according to the old methods. This increases the opportunity for donor money to be misdirected. No mention of this practice appears in the report. Is the management of huge cash sums of such little interest to the Working Group?

    Question 14:

    Why does the report entirely fail to address the matter of terrorists being on the PA payroll? Given the huge number of PA employees arrested by the IDF or having died in suicide bombings or in fighting with the IDF, why is there no comment on this in the report?

    Question 15:

    Both reports refer to the Fatah "Tax" which, according to credible press reports, is paid by all PA employees, whether or not members of Fatah, and provides a financial basis for Palestinian terror. (Fatah, led by Arafat, is the largest section of the PLO.) Both drafts however fail to mention the "Intifada tax", which was levied on all PA employees until recent months. Why? Former Palestinian Prime Minister, Mahmoud Abbas, complained in his resignation speech of his frustration in being unable to end these taxes which account for 15% of the payroll, declaring "I personally do not know where these deductions go." [The response he says he got was: "You are striking at the intifadah."] Did the Working Group willfully ignore these internally-generated sources of 'black' funding for terror?

    Question 16:

    The Wynn/Theto report annexes without explanation a list of EU-funded Palestinian assets, which it claims were damaged by Israeli army action. It provides no commentary or context. The report fails to indicate whether a response was sought or obtained from Israel. Were any of these damaged objects in fact military targets or buildings being used by terrorists? Does the Working Group consider that Israeli destruction of manhole covers and radio communication equipment somehow justifies a one-eyed view of the issues?

    Question 17:

    The initiative taken by 27% of MEPs was directed at getting plain answers to serious questions of life and death. Such questions as:

  • Has the target population - the Palestinian in the street - received substantial benefit from this European aid?

  • Should taxpayers feel satisfied that European money been spent efficiently and fairly, and does anyone know where it went?

  • Has EU funding of the Palestinian Authority been done in accordance with European law and proper Parliamentary procedures? Indeed, did the Parliament approve what has happened?

  • In view of the evidence of corruption and mismanagement, past and current, are the recommended controls strong enough, and will they produce a better chance for peace in this troubled region?
  • These questions were neither addressed nor answered. Why?

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