EU OKs Palestinian Funding — For Now

The European Union agreed Monday to grant $143 million in urgent aid to the Palestinians before a government led by the Islamic militant group Hamas takes power, a move aimed at preventing a financial collapse that could add to the chaos in the Middle East.

But the EU kept silent on what it would do once Hamas assumes control of the Palestinian government.

French Foreign Minister Philippe Douste-Blazy said the aid was required to avoid "economic chaos" from paralyzing the Palestinian Authority. It was also designed to show European support for the Palestinians remains undiminished at least until Hamas establishes its control.

International envoy James Wolfensohn has warned Mideast mediators that the Palestinian Authority is in danger of financial collapse within two weeks, largely because Israel has stopped the flow of tens of millions of dollars to the incoming Hamas government, according to a letter The Associated Press obtained Monday.

Israeli analysts say Europe is sending the wrong message to the Palestinians by giving them money. If the Palestinians elect terrorists, they should pay the price.

"At the moment, everybody keeps the Palestinian people from suffering the consequences from their own policy," said Dan Schueftan.

Hamas, which both the United States and the EU consider a terrorist organization, won a surprise victory in the Jan. 25 elections and has already taken control of the Palestinian parliament. Palestinian President Mahmoud Abbas has asked the group to form the next government.

Meanwhile, Israeli Foreign Minister Tzipi Livni said moderate Abbas is irrelevant. This points to a disagreement with the U.S., which has decided to deal with Abbas while bypassing Hamas, reports CBS News correspondent Robert Berger. Israel says Abbas does not wield any power and Hamas is calling the shots. Livni said Abbas, who supports the peace process, must not be a fig leaf for a Hamas-led terrorist regime.

Washington is seeking support from Arab allies such as Saudi Arabia and Egypt for a financial boycott of Hamas. However, Secretary of State Condoleezza Rice found little backing for that idea during her tour of the region last week.

There is concern the Palestinian Authority will collapse without international aid and that Iran could fill any funding gap, further radicalizing the Palestinians and reducing Western influence.

"I know I do not need to tell each of you that the failure to pay salaries may have wide-ranging consequences — not only for the Palestinian economy, but also for security and stability for both the Palestinians and the Israelis," Wolfensohn's letter to the Quartet of international mediators — the U.S., EU, U.N. and Russia — whom he represents, said.

For its part, the EU is taking a wait-and-see attitude.

"We need to have some patience now" to allow for government formation talks, said EU External Relations Commissioner Benita Ferrero-Waldner. "Later on, we'll have to decide what comes next."

Austrian Foreign Minister Ursula Plassnik, whose country now holds the EU presidency, said the $143 million in aid will not change the EU demand that Hamas must "accept the principles of nonviolence, recognize Israel's right to exist" and honor existing accords that the Palestinians and Israel have reached over the years.

Officials said the emergency EU aid package designed to tide the Palestinian Authority over comprises:

• $48 million to pay for the Authority's energy and other essential utility bills. These bills will be paid by the EU directly to the utilities, based on invoices validated by an international audit firm.
• $76 million for health and education projects to be paid to the United Nations Relief and Works Agency, which provides education, health care, social services and emergency aid for Palestinians in the Gaza Strip and the West Bank.
• $21 million for salaries of Palestinian Authority workers. This money will come from $83 million the EU paid into a World Bank trust fund in 2005, only half of which was spent as the Palestinian Authority missed key good governance goals last year.

Sami Abu Zuhri, a Hamas spokesman in the Gaza Strip, welcomed the gesture. He said it showed the failure of "American-Israeli efforts to tighten the economic siege on the Palestinians and the incoming government.

"We consider the EU decision to resume transferring the funds as a step in the right direction," he said. "We in Hamas welcome any foreign aid as long as it's not conditional money."

Ferrero-Waldner said emergency aid was urgently needed after Israel's decision to withhold $50 million a month in tax funds following Hamas' victory. She urged other donors, especially Arab nations, to step forward.

The EU is considering diverting aid from a Hamas-led government to the office of the more moderate president, Abbas. But there are fears this may trigger a backlash from voters who overwhelming rejected Abbas' Fatah movement.

Abbas said Saturday he will resign if peace talks with Israel remain stalled but he urged the international community to give Hamas a chance
.