The European Union Is Paying Palestinians for Not Working
by Michael Curtis
The European Union (EU) has not hesitated in making known its criticisms of the State of Israel and its suggestions for boycotts against some Israeli products. Recently, the EU agency for combating racism has been unable to define the term “anti-Semitism” and has removed the working definition it adopted in 2005. By contrast, the EU has turned a blind eye to the fact that it has knowingly been paying Palestinians for not working.
This information is revealed in a sober special report, no. 14, of the European Union’s Court of Auditors published on December 11, 2013. This special report covers the detailed story of the EU’s financial support, including direct support, to the Palestinian Authority (PA) that since 1994 has amounted to more than 5.6 billion euros.
The EU supports public services for the benefit of the Palestinian population, but the payment of non-performing civil servants does not serve this objective. About 24% of those on the payroll of PA health and education ministries, some 60,000 people, are paid but not working. They stopped reporting to their jobs when Hamas seized power in Gaza.
The new December report outlines the financial assistance given by the EU. An interim association agreement on trade and cooperation had been signed in 1997 between the then-European community and the PLO on behalf of the PA. Between 1994 and 2006, more than 2.7 billion euros were given to the Palestinians from the EU’s general budget
Another agreement was signed in 2005 between the EU and the Palestinians to support the political and economic reform agenda over the next few years. Between 2007 and 2012, a further 2.9 billion euros was given from the EU’s general budget.
EU funding has increasingly come from the PEGASE (the French acronym for European-Palestinian Management and Socio-Economic Help), the mechanism launched in 2008 to support the Palestinian Authority, officially to help it until the overall political objective of a two-state solution is achieved. It is the main instrument used by the EU to provide financial assistance directly from the EU budget.
The PEGASE Direct Financial Support (DFS) program, intended to meet recurring expenditures and give support to private-sector businesses, has provided about 1 billion euros in funding to the PA from 2008 to 2012. This is more than 10% of the PA’s annual revenue and has been an important aid in keeping the PA’s budget deficit down. That overall budget deficit is $1.7 billion, or 17% of GDP.
In addition, more than 1.3 billion euros was given from DFS. The EU is the largest donor to the U.N. Relief and Works Agency for Palestinian Refugees in the Near East (UNRWA), having provided 789 million euros to support it.
The DFS funding resulted from the crisis caused by the temporary suspension of aid to the PA after the Hamas victory in January 2006. A temporary international mechanism (TIM) was set up to ensure direct assistance to the Palestinian population, thus enabling the EU to bypass the Hamas-led government in the Gaza Strip. Since 2008, the TIM has been replaced by the PEGASE mechanism.
The EU helps the PA meet its obligations to civil servants, pensioners, and vulnerable families; maintain essential public services; and improve public finances. Part of the present problem is the number supported as part of “vulnerable families,” those living in extreme poverty in the West Bank and Gaza, which has increased from 44,000 in 2008 to 60,000 in 2012.
The PEGASE program provides support for Palestinian development, for delivery of public services, and for essential services such as fuel to the Gaza power plant to ensure sufficient electricity to people living in Gaza, a supply that has cost 183 million euros. In a variety of ways, the EU has supported the Palestinian population in East Jerusalem, which it argues should be the capital of a Palestinian state. In addition, the EU provides some financial support for businesses destroyed or damaged during the Israeli “Operation Cast Lead” in 2008 to stop Hamas rockets attacking Israel. About 22 million euros were given to 915 companies.
Criticism of the Palestinians is made politely in the report, but it is clear. The financial relationship is increasingly in “need of an overhaul,” notably in relation to its civil service. There has been little or no review of public service grades or pay scales. The report questions whether the PEGASE DFS aid to the Palestinian Authority (PA), which has been shown to be incompetent and perhaps corrupt with its finances, can now be sustained.
As a bow to political correctness, the report suggests that the continuing restrictions by Israel on the PA help cause overall fiscal difficulties, and that a way needs to be found to bring Israel to take the necessary steps to ensure that PEGASE DFS is effective. But the evidence of the report itself shows that Israel’s actions have little to do with the plight of the Palestinians. A major reason for this is that the number of Palestinian beneficiaries has been increasing while funding by outside donors has been decreasing. Even the EU has decreased its support from 524 million euros in 2011 to 358 million in 2012.
Despite the large amount of money provided by the EU, the PA faced a severe budget deficit in 2012, which led to public finance management problems. The delay in payment of salaries by the PA led to demonstrations and strikes among civil servants in September 2012.
The EU publicly supports a two-state solution to the Israeli-Palestinian conflict and envisages the creation of a viable, contiguous, and democratic Palestinian state, living side by side with Israel in peace and security. It recognizes some of the events that have set back the peace process. The first occurred in January 2006, when Hamas defeated the Fatah party in the Palestinian parliamentary elections. The EU understood that Hamas does not recognize Israel’s right to exist and indeed classifies it as a terrorist organization.
The de facto division of Palestinians occurred when fighting broke out between Fatah and Hamas in June 2007, and Hamas took control of the Gaza Strip. The EU does not have a contract with Hamas, but it does try to help the Gaza population. It would do even more by calling on Hamas to stop its terrorist activity and enter into negotiations with and officially recognize the State of Israel.
Michael Curtis is author of Jews, Antisemitism, and the Middle East.