EU Suspends Funding to the Palestinians

January 18, 2006

The European Union is showing signs of strain, as it continues with its efforts to encourage the Palestinians towards democracy.

The EU has deployed 237 observers in the region in order to supervise the elections to be held on 25th January. Benita Ferrero-Waldner, the commissioner for external relations, has signed an agreement for an additional 1.4 million euros to help the Palestinian Central Elections Commission (CEC) with voter registration and polling activities.

Yet, in the same week, Ferrero-Waldner announced that the European Union had suspended 35 million euros ($42 million) in aid to the Palestinians, citing their lack of budgetary discipline. She commented how "benchmarks have not been fulfilled."

The response of the EU should not come as a surprise to the PA. As the Funding for Peace Coalition had observed, the World Bank had already made a similar decision at the beginning of January.

Significantly, EU foreign policy chief Javier Solana had already threatened to freeze European aid to the Palestinian Authority, particularly if the Hamas group succeeds in the elections. Of notable interest is the way his comments indicate that the EU hierarchy is finally accepting the need for accountability, specifically vis--vis its own electorate.

The taxpayers in the EU, members of the parliament of the EU, will not be in a position to sustain that type of (violent) political activity.

(Hamas advocates the destruction of Israel. It has been categorised as a terrorist organisation by the EU and America)

The European position has received strong positive encouragement from the Spanish Foreign Minister, Miguel Angel Moratinos. He urged free and fair Palestinian legislative elections on January 25, but cautioned that Europe will have to re-evaluate its links with the Palestinians if Hamas wins. At a joint news conference with Al-Qidwa, his Palestinian counterpart, in Ramallah on Monday 16 January, Moratinos told reporters that:

"the necessary evaluations" would have to be made and "a decision would be taken" with regard to funding the PNA.

What follows is a report by Reuters on the suspension of European funding to the Palestinians.

EU suspends some Palestinian aid over budget

17 Jan 2006 14:28:58 GMT

Source: Reuters

JERUSALEM, Jan 17 (Reuters) - The European Union has suspended 35 million euros ($42 million) in aid to the Palestinians, citing their lack of budgetary discipline, the EU's commissioner for external relations said on Tuesday.

The rare sanction underscored intensified foreign donor scrutiny on the Palestinian Authority since Israel quit the Gaza Strip last year after 38 years of occupation. The impoverished territory is widely seen as a testing ground for statehood.

Visiting the region ahead of Palestinian legislative elections on Jan. 25, the EU commissioner, Benita Ferrero-Waldner, said half of 70 million euros ($84 million) donated through the World Bank in November has not been released, and that the issue was under discussion.

"The biggest donor is the European Commission, and we have not paid because the benchmarks have not been fulfilled," she told reporters.

"There has to be a credible finance minister, but there also has to be a budget and the budget should also remain within the limits of what the budget has foreseen," she said.

The Palestinian Authority had no immediate comment. There has been no replacement appointed for Salam Fayyad, who quit as Palestinian finance minister in November to run for parliament.

Before resigning, Fayyad predicted aid from a World Bank trust fund would be cut in response to ballooning Palestinian government wage costs. The trust has paid out at least $230 million to the Palestinians since its founding in 2004.

The Palestinian economy has withered since the start of an uprising against Israel in the occupied West Bank and Gaza in 2000, hampered by violence and by mismanagement and corruption that discourage donors.

The World Bank has said that reviving the Palestinian economy is crucial to peacemaking. But Ferrero-Waldner, who said European aid to the Palestinians had previously been held up in 2002 and 2003, said such donations could not be unconditional.

"We have a long-term commitment with the Palestinian people that we would like to improve their living conditions (but) we are not only pumping money into the Palestinians without asking for very clear benchmarks," she said.

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