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Last Updated: Wednesday, 10 May 2006, 12:52 GMT 13:52 UK
Aid plan poses challenge to Hamas
By Roger Hardy
BBC Middle East analyst

Palestinian man with sack of flour
International donors have sought a way to bypass the Hamas-led PA
A plan to get money to the Palestinians - bypassing the Hamas-led government - has been approved by the international grouping known as the Quartet.

At a meeting in New York, members of the Quartet - which brings together the United States, the United Nations, the European Union and Russia - agreed to what they called a "temporary mechanism", the details of which have still to be worked out.

The agreement is a success for the EU, which is increasingly alarmed at the deteriorating situation in Gaza and the West Bank.

Last week European diplomats, speaking off the record, had complained the US was blocking a plan to get international aid to the Palestinian territories - bypassing the Hamas-led government.

US softening

The World Bank has warned that if present conditions persist there will be a serious humanitarian crisis - leading to the possible collapse of the Palestinian Authority (PA).

The Bush administration has now, without much enthusiasm, relented.

Softening its previously hard line, it has given the EU the green light to come up with a workable plan.

This is likely to be a special trust fund administered by the World Bank.

Money will be paid into the fund for specific purposes - paying the salaries of government employees and maintaining basic services such as health and education.

The World Bank will ensure transparency.

But the scheme is not open-ended. It will operate for three months and then be reviewed.

EU officials say it will take some weeks to get the fund up and running.

Breathing space

The PA is heavily dependent on outside aid.

Last year it had a budget of $2 billion, half of which came from international donors.

Its 165,000 employees - members of the security services, as well as teachers, doctors and civil servants - have not been paid for two months.

There are shortages of food and petrol, and hospitals are finding it increasingly hard to cope.

The Europeans hope Israel might make use of the trust fund, to transfer at least some of the tax revenues it collects on the PA's behalf.

These amount to $55 million a month.

Israel suspended the transfers, and big Western donors cut off direct aid, when the Hamas-led government took office in March.

What is crucial now is how Hamas uses the breathing space which, in effect, it is being offered.

The real message of the New York meeting is that it has three months to decide whether to do what the Quartet is demanding of it - recognise Israel, renounce violence and accept existing peace agreements.

It is a message Hamas finds distinctly uncomfortable.

Watch Condoleezza Rice speak about the agreement

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