EU to release aid to Palestinians despite Hamas

Mon Feb 27, 4:08 PM ET

BRUSSELS (Reuters) - The European Union threw the Palestinians a short-term aid lifeline on Monday to help stave off imminent financial collapse, despite the appointment of a leader of the Islamist militant group Hamas as prime minister.

But the 25-nation bloc made sure most of the 120 million euros ($142 million) would bypass the Palestinian Authority, sharpening pressure on Hamas to moderate its radical policies when it takes over government responsibility.

"Today I have announced a very substantial package of assistance to meet basic needs," European External Relations Commissioner Benita Ferrero-Waldner said after EU foreign ministers discussed how to respond to the impending formation of a government by Hamas, which does not recognize Israel's right to exist and espouses armed struggle.

The package included 40 million euros to pay energy bills and 64 million euros channeled through the U.N. Relief and Works Agency for Palestinian refugees (UNRWA). But only 17.5 million euros will go to the PA to help pay salaries.

"In effect we will pay electricity bills for them, direct to the utilities concerned, including in Israel," she said.

The United States welcomed the EU move, but made clear that when Hamas took over following its resounding victory in January 25 elections, aid to the Palestinians would be reviewed.

The Quartet of international mediators -- the United States, the EU, Russia and the United Nations -- would review aid if Hamas failed to renounce violence, disarm militias and stand by previous agreements between the Palestinian Authority and Israel, a State Department spokesman said.

"Obviously, when there's a new government, we'll need to reassess our positions, based on the formation of that government and the composition of the government," said deputy spokesman Adam Ereli.

International envoy James Wolfensohn warned in a confidential letter obtained by Reuters that without emergency funds, the Palestinian Authority faced financial collapse within two weeks now that Israel has cut off tax transfers.

The EU is the largest donor to the Palestinians but its funding has been thrown into doubt by the ascendancy of Hamas, which the 25-nation bloc lists as a banned terrorist group.

"AGREE TO DISAGREE"

French Foreign Minister Philippe Douste-Blazy told a news conference it was vital to continue supporting the Palestinians.

"There would be nothing worse than not making our contribution," he said. "There would be social, economic, and... security chaos. We must encourage Hamas to evolve."

His German counterpart, Frank-Walter Steinmeier, denied that continuing funding amounted to giving the PA a free hand.

"Quite the contrary. This is a signal that we are supporting the autonomous Authority and the President," he said, adding that anything further depended on conditions set by the Quartet.

Israel has stopped monthly transfers of $50-$55 million in tax payments to the Palestinians and the United States has demanded the return of $50 million in aid.

Israeli Foreign Ministry spokesman Mark Regev played down differences between Israel and the EU on funding the PA.

Israel's position is that aid should have been cut off on February 18, when Hamas became the majority bloc in the Palestinian parliament. The EU sees the key date as the swearing in of a Hamas-led cabinet, which is not expected to happen until April.

"We have agreed to disagree," Regev said.

Wolfensohn said even if the PA survived with emergency funding, the financial crisis could bring violence and chaos unless the Quartet developed a long-term funding plan once a Hamas-led government is in place.

Ferrero-Waldner noted that even when Israel transferred the tax revenues which it collects on behalf of the Palestinians, "the Palestinian Authority cannot achieve balance in its finances without outside help."

Hamas has named Ismail Haniyeh as Prime Minister designate. Ferrero-Waldner said the EU had yet to decide whether to support his government, but would work with Palestinian President Mahmoud Abbas, regarded as a moderate.

Hamas official spokesman Sami Abu Zuhri called the EU decision a step in the right direction "as long as it is not restricted by any conditions or a swap with the rights of our Palestinian people.

(Additional reporting by Ingrid Melander and Carsten Leitz in Brussels and Adam Entous in Jerusalem)

($1=.8441 Euros)

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