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Analysis: EU aid to Palestinians - help or hindrance?

By Andreas Hackl
JERUSALEM, 19 February 2014 (IRIN) - The European Union (EU) has long been one of the most reliable foreign sources of humanitarian, economic and political aid in the OPT, providing 426 million euros (US$575 million) in 2013 alone.

In 2011, overall overseas development aid to the OPT was worth $2.5 billion, according to the Organisation 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 democratic, independent and viable Palestinian State, living side-by-side in peace and security with Israel.

But with limited progress so far in the current US-brokered peace 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?” Caroline du Plessix, a French political scientist specialized on EU policy towards the two-state-solution, told IRIN.

“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.”

Carrot and stick

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. 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 (PA) if peace talks fail, while “some people suggested giving the money to other countries, like Syria, Mali and other places around the world.”

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.

“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 told IRIN, 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, senior analyst at the International Crisis Group, told IRIN.

Building the state to come

Of the 426 million euros provided by the EU to Palestinians in 2013, 168 million was 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, and through supporting essential public services and revitalizing the private sector through policy reforms, institution-building and strengthening the relations between Palestinian enterprises and European counterparts.

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 10 years ago. How can I move on?” she told IRIN at the Ramallah district office of the PA’s Ministry of Social Affairs.

“There is poverty and we get tired of this situation,” she said, adding though that restrictions on movement (caused, for example, by the Barrier 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 Humanitarian Aid and Civil Protection Department (ECHO), which spent 35 million euros in 2013 on areas such as humanitarian coordination, legal assistance and emergency response to demolitions and evictions.

Propping up the status quo

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,an economic analyst, 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,” he told IRIN at the PA’s Ministry of Education, where he currently works. The EU’s approach to solving the conflict, he says, is part of a larger trend he calls “peaceconomics”, the feeding of an illusionary idea that institution-building and economic aid can contribute to real progress, while the actual political causes behind the difficult situation are side-lined and remain 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 smoke screen 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 Ministry of Education 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 Ministry of Finance, the Ministry of Education has full ownership of the money and 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 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.”

“Aid has not helped to fulfil Palestinians dreams”

Some anomalies in the EU’s funding to the PA emerged recently in a report of the European Court of Auditors (ECA), which criticized the EU’s paying of salaries to Palestinian civil servants in the Gaza Strip “who no longer work”. The report suggested financial assistance “be discontinued and redirected to the West Bank”. Hamas, which took control of the Gaza Strip in 2007, is classified by the EU as a terrorist group.

“Are we helping Israel to maintain the occupation, or are we actually helping Palestinians to build independence?”
So the EU continues to support the former PA structure in Gaza with salary payments even though the PA no longer has any control: 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 45.1 million euros to 62.9 million euros, an increase of 39 percent. But at the same time, contributions to PEGASE for Civil Servants and Pensioners fell from 21.3 million euros (47 percent of total pay to eligible beneficiaries) in 2008 to 10.4 million euros (16 percent) in 2012, mainly due to reductions in contributions from donors, such as Spain.

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

The UN Works and Relief Agency for Palestinian Refugees (UNRWA) faces similar challenges. This year it has a deficit of $65 million in its core budget and struggles with declining international funding. 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 20 years ago,” Alaa Tartir, programme director of the Palestinian Policy Network, told IRIN.

Despite the contradictions in EU aid policy, it is clear that without EU aid the humanitarian situation in OPT 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 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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Theme (s): Aid Policy, Governance, Human Rights, Security,

[This report does not necessarily reflect the views of the United Nations]

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