The Tech - Online EditionMIT's oldest and largest
newspaper & the first
newspaper published
on the web
Boston Weather: 66.0°F | Mostly Cloudy

EU Will Give Palestinians Emergency Funding Before Hamas Takes Power

By Steven Erlanger


The European Union on Monday stepped forward to fill the immediate funding gap for the Palestinian Authority before a Hamas government takes power, providing some $142 million (120 million euros) in aid, much of which will be funneled through the U.N. refugee agency.

About $47.5 million will go to pay energy bills the Palestinians owe to Israeli companies, $75.9 million will be channeled through the U.N. Relief and Works Agency for Palestinian refugees and $20.7 million is cash — direct budget support to help pay salaries.

The European Union acted in partial response to a dire letter from James D. Wolfensohn, the special Middle East envoy of the grouping, the quartet, that included the United States, the European Union, Russia and the United Nations.

Writing on Feb. 25, Wolfensohn warned the quartet’s foreign ministers that “unless a solution is found, we may be facing the financial collapse of the PA within two weeks,” referring to the Palestinian Authority. The acting Palestinian finance minister, Jihad al-Wazir, told him he needed “$60-80 million next week to begin to pay wages,” Wolfensohn wrote, warning of “wide-ranging consequences” for “security and stability for both the Palestinians and the Israelis” should the payroll not be met.

The financial situation of the Palestinian Authority has worsened, said Wolfensohn, the former director of the World Bank. With estimated internal tax revenues of $35 million a month, and the loss of Israeli-collected tax and customs receipts of some $50 million a month, the Palestinian Authority faces a monthly shortfall of $130 million a month — $80 million a month even if the Israelis were handing over receipts, and likely more, since the Israelis deduct from those receipts the costs of electricity and water.

For February and March, the period before a Hamas government is likely to take over, he said, the Palestinian Authority may need as much as $360 million in new funds — because of necessary loan repayments, arrears to private suppliers of energy and other goods and the Bush Administration’s decision to demand the return of $50 million provided last year for infrastructure improvements and used as collateral for bank loans.

The money from the European Union, while welcome, will not solve the Palestinian money crunch for very long, especially since most of it is not in cash. It will, however, ease the burden of supplier repayments — a large Israeli oil company, Dor Alon, had said Monday it could no longer supply fuel oil and natural gas to the Palestinians because a check for some $35 million from the Palestinian Authority bounced last week. The European money will presumably ensure the flow of energy to the Palestinians in a chilly, wet winter.

Israeli public companies supply electricity and water to the Palestinians, but deduct the cost from the customs and tax revenues the Israelis collect for the Palestinian Authority, but which Israel is now withholding because of the victory of Hamas in the Jan. 25 legislative elections.