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"As is" reference - not a United Nations document

Source: European Commission
17 July 2003

A road map paid for in euros

Article by Chris Patten, in The Financial Times, 17 July 2003

Cynicism often attends our greatest ambitions. Sending a man to the moon, launching the euro, ending the sway of communism: all these once seemed impossible. Yet they were accomplished against the odds.

When it comes to the prospects for peace in the Middle East, cynics abound. Yet the "road map" - first conceived under the Danish presidency of the European Union and later worked on and adopted by the "quartet" of the US, the United Nations, the EU and Russia - is now our best chance of achieving that peace. Many doubted it would bring us even to the fragile truce we see today.

While the Israelis and Palestinians take their first tentative steps along the route proposed, the rest of us should not lose sight of the ultimate objective. The aim is to create a viable Palestinian state, living in peace alongside an Israel that can feel genuinely secure within internationally recognised borders. Bitter history must not hold us back from working with all our strength to make that a reality. The challenge is not only for Israelis and Palestinians but also for the quartet and for the whole international community, including Arab countries.

The EU has worked throughout the bloodstained months of the intifada to keep a Palestinian administration alive and to drive a process of reform within it. Often in the face of sharp criticism at home and abroad, the EU supported the Palestinian Authority with direct budgetary assistance at a time when its revenues were withheld by the government of Israel. Between November 2000 and December 2002 the EU granted nearly Euros 250m ( £170m) to keep the administration alive and to sustain the most basic of public services. Without our assistance there would have been no Palestinian interlocutor for the negotiations now under way.

At every step, the EU's help was made conditional on reforms that would make a viable Palestinian state a reality one day and in the short term make the Palestinian territories a better, safer neighbour for Israel.

It is largely because of such leverage from the EU that the Palestinian Authority now has a credible and transparent internal accounting system, that its budget can be controlled throughout its departments and that the recruitment of staff has ceased to be a covert form of social security. It is thanks to conditions that the EU imposed that a law was passed granting independence to the judiciary, and that progress is being made towards a legal base for the elections foreseen in the road map. Today we have a Palestinian Authority making a serious effort to reform itself and determined to continue doing so.

In the past, donors have been wary of helping the Palestinian Authority, nervous of how money would be spent and how fully it could be accounted for. But thanks to the reforms that we encouraged, new funds are beginning to flow. Israel has resumed payments of the value-added tax and customs duties that it owes the Palestinians, using the single treasury account that we insisted upon. I am delighted that the US is now also coming forward with $20m in direct assistance. The sum is not enormous in itself; but it would be hard to exaggerate the importance of this policy shift within the American administration.

The road map is the only plausible path towards a viable Palestinian state. But the progress that it demands on security, and on further reform of the Palestinian administration, will not be enough in itself. Fifty per cent of the Palestinian population is out of work. Sixty per cent live below the poverty line, on less than $2 a day. Public health has declined because of crumbling basic services - sewerage, electricity supply, refuse disposal and so on. Malnutrition is a growing problem. The Palestinian economy is shattered. Continuing restrictions on freedom of movement across the Palestinian territories mean that those who have jobs cannot always reach their places of work, or get their goods to market. The cash-strapped Palestinian Authority has run up arrears to suppliers, with the result that some enterprises have gone under, while others are struggling to survive.

The EU is acting swiftly to exploit the current window of opportunity. We have launched a Euros 30m emergency programme to help Palestinian municipalities carry out urgent repairs in the worst-affected areas - starting with northern Gaza and Bethlehem. In addition, we have made a first payment of Euros 40m to the Ministry of Finance to help pay off arrears to the private sector. A further payment of Euros 40m this year is conditional on continuing financial management reform. The European Commission is doubling support available in loans to the private sector, bringing to Euros 30m the total available for a newly created emergency loan fund for small Palestinian businesses.

I do not pretend that it is possible to buy stability in the Palestinian territories. But we cannot expect peace to take root unless ordinary people see the benefits of change and gain confidence that improved conditions are here to stay.

Europe - so often criticised for lacking coherence in its external relations - has pursued a consistent policy on this question. There is a long, long way to go. But it is no small achievement that there is again a process that offers hope. The EU can claim at least some credit for keeping that hope alive.

The writer is European commissioner for external relations.

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