Related:  US welcomes EU aid to Palestinians

     

Benita Ferrero-Waldner (L), commissioner for external relations of the European Union (EU), and Austrian Foreign Minister Ursula Plassnik, whose country holds the EU presidency, attend a a press conference at the EU headquarters in Brussels, capital of Belgium, Feb. 27, 2006. The European Union announced an aid package of over 120 million euros on Monday to keep the Palestinian care-taker government functioning before a Hamas-led government is formed. (Xinhua Photo)

BRUSSELS, Feb. 27 (Xinhuanet) -- The European Union (EU) announced an aid package of over 120 million euros on Monday to keep the Palestinian care-taker government functioning before a Hamas-led government is formed.

    EU commissioner for external relations, Benita Ferrero-Waldner, announced the plan at an EU foreign ministers' meeting in Brussels.

    She said 40 million euros (1 euro equals about 1.2 U.S. dollars)would be made available to pay energy bills for Palestinians. Another 64 million euros would be channeled through the UN Relief and Works Agency for Palestine Refugees to help the most needy Palestinians.

    The money, which is mainly for health and education, can be dispersed immediately, she said.

    These two elements will help to "tackle the real hardships faced by many Palestinians in the current situation and also thus to relief the pressure on the care-taker government," said the commissioner.

    In addition, half of a 35 million-euro payment to the Palestinian Authority, as part of a World Bank trust fund, should now be unlocked to help stabilize the finances of the care-taker government, said Ferrero-Waldner.

    She said the care-taker government cannot balance its finances without outside help. The situation is made worse by Israel's decision to freeze transfers of Palestinian tax and customs revenues.

    The multi-donor World Bank fund, 60 million U.S. dollars in total, was frozen in December because of the Palestinian Authority's partial failure to meet benchmarks to put its finances in order.

    Ferrero-Waldner stressed, however, the money must be spent before a Hamas government steps in.

    "It is essential, I think, that this money is fully spent by the time the new government comes in. The World Bank has written undertakings from the acting (Palestinian) finance minister to this very effect," she told reporters.

    She warned that other donors, particularly Arab states, may need to come forward if Israel's freeze on tax transfers continues.The Palestinian tax and customs revenues retained by Israel, which totals about 60 million dollars every month, is the bulk of the budget of Palestinian Authority.

    With Hamas as much as a month away from forming a cabinet, the outgoing PA government faces a deficit of up to 370 million dollars, or 312 million euros, for February and March if all its outstanding obligations are taken into account, according to calculations of the Financial Times. Enditem