EU starts 400mn euro aid program to help Palestine authorities

The European Union on Wednesday said it had begun paying 400 million euros ($430 million) in emergency funding to the Palestinian Authority to help address its “critical” budget problems.

Brussels said the first 150-million-euro tranche includes grants to help pay the salaries of civil servants in the West Bank and support vulnerable families.

The rest of the funds will be disbursed in August and September “subject to progress in the implementation of the reform agenda of the Palestinian Authority (PA)”, the EU said in a statement.

The authority has long faced a fiscal crisis, but its finances have been hit further by the Gaza war in Gaza as Israel has withheld tax revenue meant for the Palestinian territory.

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The EU is the biggest international financial backer of the Palestinians, with its support between 2021 and 2024 estimated at 1.2 billion euros.

“The EU is fully committed to support the Palestinian Authority in these difficult times,” European Commission president Ursula von der Leyen said.

“Our 400-million-euro emergency assistance supports a substantial reform agenda and paves the way for the recovery and reconstruction of Gaza.”

The EU’s executive says that in early September it will introduce a legislative proposal for a “Comprehensive Programme for Palestinian Recovery and Resilience”.

Brussels says the plan is aimed at helping balance the PA’s books by 2026 and will link future payments to “progress in the implementation of the agreed-upon reform milestones”.

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While the war raging since the October 7 Hamas attacks on Israel has devastated Gaza, it has also hit the economy of the Israeli-occupied West Bank.

The Palestinian economy is largely governed by the 1994 Paris Protocol, which granted sole control over the territories’ borders to Israel, and with it the right to collect import duties and value-added tax for the Palestinian Authority.

Israel has repeatedly leveraged this power to deprive the authority of much-needed revenues.

But the Gaza war has tightened Israel’s grip, with the bulk of customs duties withheld since Gaza’s rulers Hamas sparked the war with their October 7 attack on Israel.

The financial crisis wracking the PA comes as international powers have touted the potential role that a bolstered authority could play in running Gaza when the war ends.