EU suspends 35 million euros in aid to the Palestinian Authority

17/01/2006
By 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 but
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.