The European Commission has set new conditions on aid to the Palestinian Authority, demanding greater transparency and insisting on rapid internal reform, commission sources said this evening.
Brussels gives €10 million a month to the Palestinian Authority budget to help ensure the provision of essential services to the population.
European External Relations Commissioner Mr Chris Patten said in a letter to the Palestinian Authority that the Commission intended to extend EU aid for another three months until October, but that further funding would be subject to the Palestinians meeting the new conditions.
The aid is used mainly to pay the salaries of some 123,000 Palestinian civil servants.
The Commission is to "encourage concrete adoption and rapid internal reform within the Palestinian Authority," sources said.
The new conditions include a demand for greater transparency in public sector employment, that the authority ensure that recruitment is limited to the absolute necessary while implementing a modern system of internal audit and financial control in line with international best practices.
The Commission has also asked that the independence of the Auditor General's office be enhanced and regular reports be provided to the Palestinian Authority President and the Palestinian Legislative Council.
In addition, Brussels has demanded that each Palestinian ministry provide a monthly detailed list of expenses, beginning in September.
It also called for the creation of the Palestinian Investment Fund which would take over the management of commercial operations from the Palestinian Commercial Service Company by December 31 2002.
The Palestinian Investment Fund would be managed "by an accountable board that will be subjected to the most stringent standards of disclosure and auditing."
Patten sent the letter on July 15th to the Authority's International Cooperation Minister Nabil Shaath and Finance Minister Salam Fayad.
The letter says the EU wished to "continue accompanying our budgetary assistance with measures that ensure the implementation of key reform items, which are indispensable for the well functioning of a future Palestinian state."
Sources say both Shaath and Fayad on July 17th accepted the new conditions while maintaining that no EU money had been used to fund terrorist activities despite claims as such by Israel.
The official Palestinian news agency WAFA has said Patten had also given instructions for the dispatch of European officials and experts to help in the preparation of the Palestinian presidential and legislative elections due in January 2003.