The European Union and other Western donors are considering expanded aid programmes to ease financial pressure on the Hamas-led Palestinian Authority, struggling under sanctions, Western diplomats said today.
The EU already provides direct support to the authority's workers outside of security forces, paying allowances through a mechanism that bypasses the Hamas-led unity government.
One proposal under EU consideration calls for expanding the existing Temporary International Mechanism (TIM) to pay a portion of the Palestinian Authority's arrears to private Palestinian contractors, diplomats said.
"If it's decided, it would start at a low level. But if there is sufficient availability of funds, it could be expanded," an EU official involved in the process said.
Another European diplomat said the initial EU contribution through the TIM was likely to be only 10-15 million euros ($13-20 million), but it could grow over time as more donors contribute funds.
Palestinian Finance Minister Salam Fayyad has already begun talks with other Western donors and the World Bank about the possibility of restoring budget support needed to keep the Palestinian Authority and its ministries running longer-term.
Western donors led by the United States cut off direct financial aid to the Palestinian Authority in March 2006 after Hamas defeated President Mahmoud Abbas's secular Fatah faction in parliamentary elections.
Coupled with Israel's withholding of tax revenues that it collects on the Palestinians' behalf - the Authority's main domestic source of funding - the sanctions have pushed the Hamas-led government to the brink of financial collapse.
One Palestinian official said the EU would soon pay "millions of dollars" to cover Palestinian Authority payment arrears, a move that would be equivalent to a cash injection but would need no direct transfers to the Palestinian government.