The Palestinian Authority is on the brink of bankruptcy, with a 744 million Euro hole in its finances. Now, more than ever, it needs international donors like the European Union.
The unemployment rate is sky high – as much as 70 per cent in Gaza and 40 per cent in the West Bank – and around half the 3.5 million-strong population lives in poverty.
Such a precarious position gives the Palestinians the dubious distinction of being the largest per capita recipients of foreign aid in the world.
In 2005 the figure totalled 910 million euros, shared out between humanitarian and infrastructure projects, or given directly to the Palestinian Authority.
The EU is the biggest benefactor. Of the 500 million it donates only 66 million goes straight to the PA.
That cash comes with strings attached. Ursula Plassnik, Foreign Minister for the current EU head Austria, explained the conditions imposed.
“The principles are quite clear – non acceptance of violence, the denial of violent means, and an acceptance that peaceful further development for the Israeli-Palestinian issue must be based on a negotiated two states solution,” she said.
Two problems have reinforced Palestinian dependence on foreign aid.
Firstly, the Israeli-imposed restrictions on movement, and secondly, corruption and mismanagement in the Palestinian Authority.
The security barrier being built by the Israelis in the West Bank prevents the easy flow of trade, and the Palestinians have no control over their maritime ports or air space.
In 2002 the new runway, financed mostly by European aid, was destroyed by air strikes.
The EU has also repeatedly withheld donations because goals on good governance were not met. For example, last month the Palestinians were found to be pushing up official salaries and hiring new staff far too quickly.
The election of Hamas presents even more profound problems for Western donors who have to justify how money is spent and why.