US opens the door for Europe to save Palestinians from funding disaster

Posted in Israel / Palestine | 10-May-06 | Author: Ewen MacAskill| Source: Guardian (UK)

A Palestinian baby lies in an incubator in a kindergarten at Shifa hospital in Gaza.

· Change follows pressure from EU and Russia
· Mechanism suggested for cash to bypass Hamas

The US softened its hardline position on providing aid to the Hamas-controlled Palestinian Authority last night in the face of a catastrophe which threatens to leave thousands of people in Gaza and the West Bank short of cash, food, medicines and petrol.

Washington signalled that, while not prepared to deal with Hamas directly, it was content to let the EU, which has been the biggest donor to the Palestinians, find a way of bailing out the Palestinian Authority to prevent it from collapsing.

The US, in a joint statement with the UN, the EU and Russia, agreed that the European Union should explore "as soon as possible" an undefined mechanism for channelling funds to the Palestinians.

Both the US and the EU cut aid to the Palestinians after the election of Hamas in January, saying they would not deal with terrorists.

But the EU position has not been as hardline as the US and both the EU and Russia went into yesterday's meeting urging Washington to soften its approach.

The meeting coincided with publication of a World Bank report warning the financial crisis gripping the Palestinian Authority was deeper than the bank first thought and could leave the West Bank and Gaza ungovernable. It added that failure to pay the salaries of 165,000 workers in the Palestinian Authority could lead to a collapse of the infrastructure that would be hard to reverse.

Mahmood Abbas, the Palestinian president, appealed to the international community to provide funds to pay salaries. He said: "A quarter of the Palestinians rely on the public sector salaries, and failure to pay these salaries could jeopardise the very foundation of the institutions of the Palestinian Authority and the future Palestinian state."

He added: "Besides the potential humanitarian crisis resulting from the general deterioration of the economic situation, inability to pay salaries might have deep destabilising political and security implications."

Negotiations over funding took place at a meeting at UN headquarters of the so-called Quartet, which is made up of the US, the UN, Russia and the EU, and which was set up to try to find a Middle East peace settlement.

The meeting was attended by Condoleezza Rice, the US secretary of state, Kofi Annan, the UN secretary general, Sergey Lavrov, the Russian foreign minister, and Javier Solana, the EU's foreign affairs chief.

They agreed, in a statement, "to endorse a temporary international mechanism that is limited in scope and duration, operates with transparency and accountability, and ensures direct delivery of any assistance to the Palestinian people".

The new system will be reviewed after three months.

The EU will invite to Brussels experts, including the World Bank, to draw up details of this funding mechanism.

One proposal is for a mechanism by which the aid would reach the Palestinian people but not go directly through Hamas.

France proposed, through the EU delegation, that the World Bank should channel funds to the Palestinian Authority to pay the salaries. Another option being floated is to give money directly to the office of Mr Abbas, whose Fatah party is not designated by the US as a terrorist organisation.

The US announced after Hamas took power that it would withhold $411m (£220m) in aid over the next few years and asked for the return of $30m it had already donated.

In a token gesture, the US said yesterday that some of the $30m could be given back to the Palestinians as part of a modest package of medical aid rather than going direct to the Hamas-led government.

About $4m would be given in medicines and medical equipment, and the rest distributed through non-governmental organisations.