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The
problem of the financial support to the Palestinian people
While
Palestinian coalition-building efforts were underway, on 27
February 2005 the EU decided to free €120 million in
favour of the Palestinian Government through the good offices
of the World Bank Trust Fund. Out of the financial package,
€40 million were allocated to the Israeli government
in order to cover the Palestinian Authority's electricity
bills; some €64 million went to finance health and education
projects, mostly managed by UNRWA; €17.5 million covered
PA's employees' salaries. The latter represented the only
portion of the aid package to go into the PA's central budget
directly. For its own nature, payments directly made to the
Authority's Single Treasury Account are not linked to specific
kinds of expenditure. In 2002-2003, a similar means of financial
support - the direct budgetary assistance - came under harsh
criticism following allegations that EU money was being diverted
to support terrorist activities. Nowadays, with the lead of
Palestinian politics being taken by Hamas, which has not renounced
violence as a legitimate political tool yet, PA's main donors,
respectively Israel, the EU and the United States, have grown
increasingly concerned that their money could in fact be misspent.
On the other hand, the worsening of the humanitarian situation
in the OPTs makes International aid a compelling necessity.
In addition, with Palestinian private sector lagging behind
in development, funds would be channeled to the public sector,
which is the best position to assist Palestinians and artificially
keep Palestinian economy afloat. Eventually, a significant
portion of the public sector's expenditure would be used to
support the ability of the Authority to pay the salaries of
its employees.
At
the end of 2005, the PA had three major sources of funding:
revenues transferred from Israel (€45 million/month);
budget support from the International Community (€30
million/month); domestic revenues (€20 million /month).
Data shows that a significant portion of the PA budget is
used to pay 152,000 employees, including some 73,000 security
and police personnel, 39,000 people working in education and
11,000 employed in the health sector. According to figures
released in OCHA's Humanitarian report, as of January 2006
PA employees make up the 37 % of all employed in Gaza, and
14 % of all employed in the West Bank. This means that an
estimated 942,000 - that is, the employees' and their dependants
- rely on the PA wage earner. This figure accounts for about
25 % of the total Palestinian population. As a result, 64
% of West Bank and Gaza residents live under the poverty level
and one-third - about 1,4 million - is dependant on food aid
to meet part of their food needs. Provided that the private
sector has shown limited capacity to absorb any new prospective
unemployed, cutting PA salaries - argues OCHA - would have
dire consequences on the state of Palestinian economy.
As
monthly transfers from Israel of customs revenues and VAT
clearances will not be forth coming - certainly not when elections
are a week away -, the Quartet, notably EU and the US, are
expected to share the burden of Palestinian humanitarian aid.
But how to assist the Palestinian people at a time when the
Palestinian Authority is ruled by elected members of an organization,
Hamas, that both EU and US consider and treat as terrorist?
Following
the victory of the Hamas in January 25 parliamentary elections,
the EU Council met on 30 January 2006 to lay down the conditions
for continuing EU financial support: 'The Council' - it is
read in its conclusions - 'expects the newly elected PLC to
support the formation of a government committed to a peaceful
and negotiated solution of the conflict with Israel based
on existing agreements and the Roadmap as well as to the rule
of law, reform and sound fiscal management. On this basis
the European Union stands ready to continue to support Palestinian
economic development and democratic state building'.
The
European Parliament, in its resolution of 2 February, affirmed
'that its commitment to remain the biggest aid donor to the
Palestinian Authority and to continue assisting Palestinian
economic development and Palestine's democratic process will
be dependent on the new government's clarification on denouncing
violence, and recognizing Israel'.
The
European Commission, which manages international aid programmes,
subscribed to both Council's and Parliament's recommendations.
It decided nonetheless to allocate financial aid to the interim
government after the Quartet's Special Envoy, the American
James Wolfensonn, had warned against an urgent shortfall of
funds, which would have, inter alia, affected the PA's ability
to pay the salaries of the employees.
As
recently as Monday 13 March, in the ties of a meeting with
Austrian President Heinz Fischer, whose country holds the
EU presidency, Egyptian President Hosni Mubarak warned that
cutting aid to the Palestinian Authority would encourage terrorism.
'The aid is used by the man-in-the-street to buy medicine
and to send his children to school. If this money is cut,
terrorism will grow and all the (Palestinian) people will
suffer', Mubarak told reporters.
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