EU funds disappear

A TEAM of inspectors from OLAF, the European Union fraud office, is this week arriving in Jerusalem to investigate whether EU funds have been misdirected by the Palestinians.

The European fraud-busters come at a time when allegations are mounting of corruption in the Palestinian Authority.

Palestinian officials and employees of pressure groups in the West Bank and Gaza are accused of having systematically diverted foreign aid over recent years.

But the outcome of the OLAF investigation is by no means certain.

That's because European Union officials, orchestrated by EU External Relations Commissioner Chris Patten, have repeatedly ignored the signs that millions of euros of taxpayers' money may be ending up in the wrong Palestinian pockets.

In the hope of strengthening ties with Yasser Arafat and the Arab world, EU leaders have proved remarkably reluctant to find out exactly how their aid money is spent.

Arab states have reduced their funding in protest at the stalled peace protest. Does the EU have the will to do the same?

At the very least, the EU should consider its continued support conditional on clear-cut action by Arafat to implement the first phase of the Road Map peace plan. This calls for the Palestinians to 'declare an unequivocal end to violence and terrorism'.

The EU has placed customs tariffs on Israeli goods produced in West Bank settlements. EU aid to Israel is not allowed to be used in the occupied territories. The time may have come for the EU to apply similar sanctions to the Palestinians.

Yasser Arafat is suspected of having been paying the salaries of terrorists from the e10m in monthly EU budget support for his civil service.

Patten's claims that the EU funds were minutely supervised by the IMF have been disputed by the IMF official responsible, Salaam Fayyad, now Palestinian finance minister.

An IMF report concluded that $900m was 'diverted' from the PA budget up to 2000.

Former Palestinian cabinet minister Abdel Fattah Hamayel admits paying $40,000 per month 'living expenses' to those Al-Aqsa Martyrs' Brigades gunmen not already employed by the Palestinian security forces.

Stephen Bloomberg, a London-born engineer, is suing the EU for e20m. In August 2001, two Palestinian gunmen sprayed his car with bullets, killing his pregnant wife and leaving Mr Bloomberg and his teenage daughter paralysed in wheelchairs.

The gunmen were caught by the Israelis. One was a police officer and the other the police chief from the West Bank town of Kalkilyeh. Their salaries at the time were paid by the EU.

It is also alleged that corruption may have tainted EU donations to Palestinian Non Governmental Organisations.

Much of the e105m donated since 2000 has been channelled through the Palestinian Finance Ministry.

Funds are budgeted at an exchange rate of 4.5 shekels to the dollar and paid out at a rate of 3.5 shekels to the dollar.

No one knows what happens to the millions represented by the exchange gap.

Concrete action

LAST week, lawyer Khader Shekirat was arrested by Palestinian police after the EU accused him of stealing $2m from LAW - the EU-funded Palestinian human rights group which he headed.

Recently, the Palestinian NGO Network flatly refused to sign a pledge, requested by the American aid body USAID, that they will not 'provide material support or resources to any individual or entity that advocates, plans, sponsors, engages in or has engaged in terrorist activity'.

They said they preferred to reject the $1.3m received from USAID in the past decade rather than sign the pledge.

The EU should consider a similar pledge - combined with concrete action - from the Palestinian NGOs and the Palestinian Authority government.

By Matthew Kalman, Daily Mail correspondent in Jerusalem