The European Union will release substantial aid to the Palestinians today to stave off a looming financial crisis despite the appointment of a leader of the Islamist militant group Hamas as prime minister.
"Today I will announce a very substantial package of assistance to meet basic needs," European External Relations Commissioner Benita Ferrero-Waldner said as EU foreign ministers gathered for talks on how to respond to the impending formation of a Palestinian government by Hamas.
The package would total €120 million, including €40 million to pay electricity bills and €64 million channelled through the UN Relief and Works Agency for Palestinian refugees, she said.
"In effect we will pay electricity bills for them, direct to the utilities concerned, including in Israel," she said.
The EU is the largest donor to the Palestinian Authority, but its funding has been thrown into doubt by the election of
Hamas, which the bloc lists as a banned terrorist group and which does not recognise Israel's right to exist.
The move comes after Israel stopped the monthly transfer of $50 million to $55 million in tax payments to the Palestinians, and US officials warned that Washington could cut off funding.
"The Palestinian Authority cannot achieve balance in its finances without outside help," Ms Ferrero-Waldner said, calling on others, especially Arab countries, to do more to fund it.
She noted that even when Israel transferred the tax revenues that it collects on behalf of the Palestinians, the authority still runs a deficit.
The EU has also decided to unblock €17.5 million frozen in a World Bank-administered trust fund. The bloc originally paid €70 million into this, of which €35 million was disbursed, but the remainder stopped over the Palestinian Authority's failure to meet certain benchmarks.
This €17.5 million tranche will be used to pay salaries and is the only part of the new aid package announced today to be paid directly to the Palestinian Authority.