EU struggles to keep Abbas-led Palestinian government afloat

EU foreign ministers, meeting in Brussels, were to endorse a decision by the European Commission to release 120 million euros (142 million dollars) in funds to help the cash-strapped Palestinian Authority.

But they were not expected to take any clear political stance on Hamas, which easily won last month's legislative elections, but figures, embarrassingly for the Union, on its terrorist blacklist.

"The issue before the European Union is whether we resume aid to the existing interim authority, not to any Hamas government that has yet to be sworn in," British Foreign Secretary Jack Straw told reporters.

The EU's position has been vastly complicated by Israel's decision to unilaterally sanction the Palestinian Authority, depriving it of around 60 million dollars a month in taxes and customs duties.

Before their talks, external relations commissioner Benita Ferrero-Waldner announced that the EU money would help the transitional Palestinian government meet its basic needs, such as energy bills and salaries, for about two months.

The Palestinian Authority, led by President Mahmud Abbas from the long-serving Fatah faction, is desperate for funds. It had to borrow money last month to pay the salaries of public servants.

Ferrero-Waldner said that around 40 million euros would be used directly for the government's energy bills and there would be 64 million euros in direct aid channelled through an UN agency for activities like education, health and social services.

On top of that, the commission aimed to release 17.5 million euros from a World Bank trust fund to pay the transition government's salaries.

She said the commission, the EU's executive body, was releasing the funds because "we see the political necessity to support Abbas."

A Hamas official in Gaza City welcomed the release of the EU funds as "very reasonable decision" and added: "The EU aid should continue when the new government takes up its duties".

As Ferrero-Waldner made the announcement, the private Israeli firm that provides gasoline to the Palestinian Authority said that a cheque for more than 22 million dollars bounced last week and announced it has stopped deliveries.

Israel's other sanctions include travel restrictions on people affiliated with Hamas and imposing extra security checks on Palestinians.

The European Union is the biggest provider of aid to the Palestinians but it has been put in a delicate position after the poll victory by Hamas. The elections were described as free and fair by virtually all observers.

The ministers will debate how to proceed with Hamas but are unlikely to take a clear position until the new government is formed and its position on recognising Israel, renouncing violence and working peacefully for a two-state solution is clear.

The Financial Times newspaper said the international Quartet -- the United States, the EU, the United Nations and Russia -- will consult on Wednesday on how to avert the Palestinian Authority's imminent financial collapse.

"The World Bank has recommended that disbursement to the Palestinian Authority be resumed. That is the position the British government is taking and whether the European Union adopts that position remains to be seen," Straw said.

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