EU aid to Palestine: How throwing money at a problem doesn't solve it

Ever since it began, the Arab-Israeli conflict has been one of the key security issues in the Mediterranean region. It therefore appears as little surprising that the European Union, the world’s largest aid donor is also the biggest contributor to the Occupied Palestinian Territories (OPT). Since 2007, the EU has been donating an annual average of €480 million – that is without taking into account the individual member states’ bilateral contributions.

The EU’s aid allocation is mainly channelled through the European Neighbourhood Policy (ENP) and the European Commission Humanitarian Aid department (ECHO) and comprises a wide range of tools to provide humanitarian relief and support the state building process. For instance, the PEGASE mechanism is a programme partly designed to finance Palestinian public services and provides one fifth of the salaries to the Palestinian Authorities’ (PA) 170,000 civil servants. The EU is an open supporter of the two-state solution and frames its development policy within the long-term objective of ‘building an independent and viable Palestinian state that can live side-by-side in peace and security with Israel’.

However, in light of the 2014 Israel-Gaza conflict, we can question the efficiency of the allocation of aid. Its worrying lack of transparency was brought to the public’s attention in 2013 when an independent auditing of the aid allocation examined the destination of the aid sent by the European Commission between 2008 and 2012. It revealed that up to €1 billion had been used to pay Palestinian civil servants who had not been working since 2007. The auditors also reported that the allocation of €90 million originally designated to pay for fuel taxes and support Gaza’s power plant was ‘unclear’.

Even when correctly allocated, the EU development design appears terribly ill-suited to the local situation. Alaa Tartir, an LSE researcher, summarised the situation as following the pattern of ‘the US decides, the World Bank leads, the EU pays […]’. Indeed, the EU, like many international aid donors, has been following the policy directives of the World Bank. The institution issued a report in 2012 that advised the OPT to imitate the Asian Tigers by ‘integrating into world supply chains’ and aiming to build a business environment ‘among the best in the world’. When one takes into consideration the reality of shortages, lack of infrastructures and the impossibility for the Palestinian Authorities to exercise control over their borders, those prescriptions seem out of sync.

The flowing of such amounts of capital to the region has moreover created ‘NGO economies’, which are completely unsustainable in the long run. They have even been accused of excluding locals and increasing the cost of living in cities like Ramallah and increase the dependence on Western donors. The infrastructures they finance are in a lot of cases destroyed by the Israeli army. In fact, as 60% of some Palestinian Territories are under Israeli control, the reconstruction of infrastructures depends on the willingness of the Jewish state to grant building permits. The OPT also remains heavily dependent on Israeli imports and thus a sizable proportion of EU aid is dedicated to the payment of the trade deficit with Israel.

Therefore, in an austerity-minded and crisis-plagued Europe, some experts such as Peter Cleppe, director of Open Europe Brussels, recommends the EU to stop spending the taxpayers’ money on a policy that shows low returns on investment. In fact, other grave humanitarian crises could surely benefit from larger funds, for example in Syria or Mali. The EU does not however seem to show signs of donor fatigue yet and is unlikely to reduce aid substantially in the near future in fear of causing critical instabilities.

The spending of such large amounts of aid is completely unproductive until the EU addresses the real root of the problems. A local think tank, Al-Shabaka, argues that aid policies should focus on ways to act against dispossession and to promote the self-reliance of the Palestinian economy by supporting local agriculture, enterprises, cooperatives and IT sectors to provide Palestinians with sustainable tools to improve their condition. Many experts believe that it is only through a significant improvement of Palestinians’ living condition that peace with their Israeli neighbours will be reached, as it would increase the credibility of the negotiations. Those actions should undeniably be mirrored by a higher pressure put on the Israeli side of the conflict to achieve a sustainable solution, starting with the recognition and respect of the rights of the Palestinian population.

Now, as a growing number of countries across Europe is voting in favour of the recognition of Palestine as a sovereign state, a reframing of the European policy towards the Occupied Palestinian Territories needs to be prioritized. Change is not only in the interest of the Palestinian people. The EU’s image abroad, and especially in the Middle East and North Africa (MENA) region, would greatly benefit from a more active role on the road to the resolution (or at least an improvement) of the Palestinian-Israeli situation. For member states such as France, where the issue is of high political salience, it could also be beneficial internally. Moreover, as a report published in 2012 by the United Nations predicts that by 2020, the situation in Gaza will be simply unliveable due to its fast growing population and the absence of infrastructures, the issue of Occupied Palestinian Territories needs to be efficiently tackled before it turns into an even bigger (and yet another) security concern in the EU’s backyard.