Europe’s unaccountable Palestinian Aid

At a time of austerity and belt-tightening, the European Union remains the biggest donor to Third World countries. EU assistance to the developing world serves European values and objectives—but only if EU institutions abide by the highest standards of accountability in managing European taxpayers' money. As a recent report by the European Court of Auditors found, that hasn't always been the case with respect to EU aid to the West Bank-based Palestinian Authority.

Since the 1994 Oslo Agreement, which created the Palestinian Authority, the EU has offered generous financial assistance to Ramallah to help advance a just and lasting peace between Palestinians and Israelis. The EU is today the largest donor to the Palestinian Authority, which relies mainly on foreign donations. But European lawmakers have a duty to ensure that EU funds aren't diverted from the noble purpose for which they're intended.

In its report, issued in December, the European Court of Auditors revealed major dysfunctions in the management of EU financial support to the Palestinian Authority, and called for a serious overhaul of the funding mechanism.

Among other things, the court criticized the absence of any conditions for EU aid to the Palestinian Authority, an approach that reduces the potential leverage of the EU to push for more reforms from the Palestinian Authority. This is a surprising exception to the EU's famous "more-for-more" principle, according to which the EU offers stronger partnership and more incentives to countries that make more progress toward democratic reforms. This principle applies to every other recipient of EU aid in the world. In other words, the Palestinian Authority is the only body that receives EU funds regardless of its human-rights record or economic performance.

Enlarge Image

Palestinian high school students attend graduation from the ruling Hamas militant group's annual high school military training program in the Gaza Strip on Jan. 7, 2014. Associated Press

The court also revealed that, since 2007, "a considerable number" of Palestinian Authority civil servants in Gaza have received their salaries partly funded through EU aid—even though they "were not going to work due to the political situation in Gaza." How exactly does this contribute to peace-building? And how can the EU preserve its credibility back home when it pays salaries to people who don't work, while millions of European citizens are unemployed?

The court also found that the EU paid insufficient attention to the fungibility of the funds it provided to the Palestinian Authority. There is reason to believe that EU financial assistance has allowed the Palestinian Authority to use its own general budget to support terrorist or criminal activities.

The Palestinian Authority, for example, allocates a significant portion of its budget to paying salaries to Palestinian prisoners convicted of terrorism offenses. These salaries are up to five times higher than the average salary in the West Bank. Prisoners also receive large grants from the Palestinian Authority. According to the Israeli Ministry of Foreign Affairs, in 2012 the Palestinian Authority's payments to convicted terrorists in Israeli prisons and to the families of deceased terrorists (including suicide bombers) together accounted for more than 16% of the annual foreign donations and grants to the budget of the Palestinian Authority. In February this year the Palestinian minister for prisoners' affairs announced that €30 million will be allocated to current or former prisoners in 2014.

One of the Palestinian Authority's main challenges is its widespread reputation for graft. That reputation has contributed to the success of Hamas, an EU-designated terrorist organization. Very simply, the more the PA is perceived as corrupt by the Palestinian people, the greater their support will be for Hamas. Thus, to promote peace and stability, Brussels must help the Palestinian Authority build strong and transparent institutions. This can't be achieved as long as the EU fails to set clear conditions for aid.

How can we ensure that EU financial assistance to the Palestinian Authority helps advance peace and stability in the region, while also promoting freedom, democracy and the rule of law? How can we guarantee no EU funds are used to reward terrorism? How can we be sure that EU money meant for public investment doesn't wind up in private Palestinian bank accounts?

The report from the European Court of Auditors is a wake-up call on the need for stricter supervision of how EU funding to the Palestinian Authority is spent. The plenary of the European Parliament last week passed a resolution calling for greater transparency in EU aid to the Palestinian Authority.

As chair of the European Parliament's Committee on Budgetary Control and a contributor to that resolution, I'm proud of my colleagues. But much more needs to be done: A useful next step would be the imposition of clear benchmarks and conditions that the Palestinian Authority would have to meet in order to receive additional EU funds. These should include improving the state of human rights in the West Bank, cracking down on corruption and cutting off subsidies to convicted Palestinian terrorists.

In these hard times, Brussels shouldn't tolerate blatant misuse of EU taxpayers' money.

Mr. Theurer is chairman of the European Parliament's Committee on Budgetary Control.