Is EU aid a smokescreen around Palestine’s problems?

While essential to many Palestinians’ survival, some say aid has not generated sustainable development and helps prop up the Israeli occupation. Ashraf Amra APA images

JERUSALEM (IRIN) - The European Union has long been one of the most reliable foreign sources of humanitarian, economic and political aid in the occupied West Bank and Gaza Strip, providing 426 million euros ($575 million) in 2013 alone.

In 2011, overall development aid to the West Bank and Gaza was worth $2.5 billion, according to the Organization for Economic Co-operation and Development.

Much of this aid to the Palestinian people is focused on a single long-term objective, according to EU officials — the building up of the institutions of a future Palestinian state.

But with limited progress so far in the current US-brokered Israeli-Palestinian talks and the wider aim of the realization of a Palestinian state, some in the more austerity-minded EU are starting to wonder if the aid is being well spent, when humanitarian crises in Syria and Mali are in need of greater funds.

“By now there is no Palestinian state. The point is: what are we funding here? Are we helping Israel to maintain the occupation, or are we actually helping Palestinians to build independence?” said Caroline du Plessix, a specialist on EU policy towards the two-state-solution with Sciences Po, a French institute on political science.

“Not sustainable”

“EU member states are today much more aware than before that their aid has not made possible the creation of an independent Palestinian state,” she said, adding: “The EU is trying to figure out what the best strategy may be.

“Member states need to show that their policy is reaching its ends and is effective. But if the main solution still is the two-state-solution and we are not really going in that direction, this policy is not sustainable and cannot go on for ever.”

A substantial reduction in EU aid seems unlikely at the moment. Such a move would have dramatic consequences for the Palestinian economy and the livelihoods of tens of thousands of families.

“There will be a price to pay if these negotiations falter,” the EU’s ambassador to Israel, Lars Faaborg-Andersen, said in late January (“EU warns Israel, Palestinians of the cost of peace failure,” Reuters, 22 January 2014).

In December 2013, an EU official was cited in the Israeli newspaper Haaretz as saying that the EU may cut off financial aid to the Palestinian Authority if peace talks fail, while “some people suggested giving the money to other countries, like Syria, Mali and other places around the world” (“EU to reconsider Palestinian aid if peace talks with Israel fail,” 3 December 2013).

On the other hand, EU foreign ministers are making unprecedented offers, setting out a very substantial set of incentives designed to encourage both parties to finalize a peace agreement (“EU offers ‘unprecedented’ support for Middle East peace deal,” European Voice, 16 December 2013).

“Gradual reduction”

“These incentives aim at boosting prosperity for both Israelis and Palestinians by increasing access to European markets, facilitating trade and investment and deepening business and cultural ties,” EU representative John Gatt-Rutter said, adding: “Therefore, at this stage our approach is one of encouraging both parties to seize this unique opportunity provided by the peace negotiations.”

“In spite of donor fatigue in Europe we will not see more than a limited gradual reduction — say 10 percent a year — in European aid if negotiations fail because European leaders do not want to trigger major instability or a humanitarian crisis,” Ofer Zalzberg, a senior analyst at the International Crisis Group, said.

Of the 426 million euros ($585 million) provided by the EU to Palestinians in 2013, 168 million euros ($231 million) was categorized as “direct financial support” to the PA under the so-called PEGASE mechanism.

PEGASE helps the PA to meet its recurrent expenses through paying salaries, pensions and social allowances to people in extreme poverty. It also provides support for both public services and the private sector.

The funds are transferred directly to individual beneficiaries like 55-year-old Nabila from the Qaddura refugee camp. “I get 750 shekels [$210] every three months, have a disabled son, and my husband died ten years ago. How can I move on?” she said at the Ramallah district office of the PA’s social affairs ministry.

“Miserable situation”

“There is poverty and we get tired of this situation,” she said, adding though that restrictions on movement (caused, for example, by Israel’s wall in the West Bank and numerous Israeli checkpoints allegedly set up for security reasons) highlighted a greater problem that aid would never solve.

“How do you want to solve this problem? Why do we have to be in this miserable situation?”

In addition to the direct financial support, humanitarian aid is provided through the European Commission’s Humanitarian Aid and Civil Protection Department (ECHO), which spent 35 million euros ($48 million) in 2013 on areas such as humanitarian coordination, legal assistance and emergency response to demolitions and evictions.

EU aid faces the same challenges as non-governmental aid groups have faced — that by providing support they may inadvertently be playing a political role by helping prop up the status quo, giving life-support services that should normally be provided by Israel, as the occupying power.

“EU funding is strategic. Its main aim is to prevent instability. It is thus scared of the PA’s breakdown,” said Caroline Du Plessix.

For Sami Abu Roza, former economic policy adviser to Mahmoud Abbas, the PA’s de facto president, this system of dependency has a bitter political aftertaste.

“If you take away the good intention behind the money, aid is a substitute for not having real remedies,” Abu Roza said. The EU’s approach to solving the conflict, was part of a larger trend he called “peaceconomics,” the feeding of an illusion that institution-building and economic aid can contribute to real progress, while the actual political causes behind the difficult situation were sidelined and remained unresolved.

“Patronizing attitude”

“The EU’s attitude towards Palestinians is patronizing, as if money was the only thing Palestinians needed,” he said, adding: “They are sacrificing real solutions for economic aid, building a smokescreen around the real problems.

“Palestinians know that any money coming to Palestinians is political. But they also know that the world won’t stop paying for Palestinians under occupation. That’s the strange kind of peace Palestinians live in.”

In an attempt to decrease the political dependence from aid, the PA’s education ministry has implemented a new mechanism, the Joint Financing Agreement, which has been running for about three years. With aid money flowing from the German KfW Development Bank, Finland, Ireland, Norway and Belgium, directly into a pool at the treasury of the PA’s finance ministry, the education ministry decides how and where it is spent.

“It’s a small path to independence, towards political independence,” Abu Roza said.

But for one senior official in the ministry, who asked to remain anonymous, the notion of independence remains unreal. “We don’t have control of our own borders, no taxation, and all of Area C [a zone comprising 62 percent of the West Bank] is under Israel’s control. What economic independence are we speaking of?” he said, adding that the PA was not created to become a social entity providing salaries and services to Palestinians. “Its aim was political, and so are our problems.”


Some anomalies in the EU’s funding to the PA emerged recently in a report of the European Court of Auditors (ECA), the Union’s own financial watchdog. The report criticized the EU’s paying of salaries to Palestinian civil servants in the Gaza Strip “who no longer work.”

The report also suggested financial assistance to Gaza “be discontinued and redirected to the West Bank” (“European Union direct financial support to the Palestinian Authority,” 11 December 2013 [PDF]).

The EU refuses to give aid directly to the Hamas government in Gaza. So the EU continues to support the former PA structure in Gaza with salary payments even though the PA no longer administers the Strip. The political cost of stopping funding is seen as too great.

From 2008 to 2012, the average number of civil servants and pensioners whose salaries were at least partly paid by the EU rose from 75,502 to 84,320, about half of the PA’s 170,000 civil servants and pensioners.

During the same period, the average monthly PA wage bill for EU beneficiaries rose from 45 million euros ($62 million) to 63 million euros ($86.5 million), an increase of 39 percent.

But at the same time, contributions to PEGASE for civil servants and pensioners fell from 21 million euros ($29 million) (47 percent of total pay to eligible beneficiaries) in 2008 to 10 million euros ($14 million; 16 percent) in 2012, mainly due to reductions in contributions from donors, such as Spain.

These pressures point to a new situation in which the PA is finding it increasingly difficult to pay salaries and pensions on time.

“Independence further away”

UNRWA, the UN agency for Palestine refugees, faces similar challenges. With a deficit of $65 million in its core budget this year, the agency struggles with declining international funding (“Garbage and resentment piling up in West Bank refugee camps,” Haaretz, 18 January 2014). The EU is UNRWA’s largest donor.

“Aid has not helped to fulfil Palestinians dreams, nor did it lead to sustainable development. Independence is today further away than twenty years ago,” Alaa Tartir, program director of Al-Shabaka, a Palestinian think tank, said.

Despite the contradictions in EU aid policy, it is clear that without EU aid the humanitarian situation in the West Bank and Gaza would worsen significantly.

“If we reach a condition where there is no more aid for PA employees, who will fill this gap? This will have a severe humanitarian impact,” said Tommaso Fabri, head of the Jerusalem office of the charity Doctors Without Borders.

One beneficiary of the EU’s direct assistance to the PA is 49-year-old Said Samara, a teacher at the Secondary Boarding School in Ramallah.

“As a teacher, I hope that this aid will continue. But as a teacher, and for my students, I also need some hope for an independent Palestinian country,” he said.

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