OLAF to probe Palestinian funds scandal

The OLAF probe will cover bookkeeping relating to charges made by members of the European Parliament that monthly payments of Euro 10m (about £6.4m) by the commission are being used to fund terrorist activities.

Earlier this month, over a hundred MEPs signed a petition calling for an official inquiry.

Although Chris Patten, European commissioner for external relations, initially opposed such an inquiry, he said yesterday that the OLAF investigation was 'welcome'.

He added: 'The commission has fully investigated repeated allegations that some of these budgetary payments may have been misused. No evidence to that effect has yet come to light. It is natural that OLAF should itself choose to investigate these allegations, in line with its policy of zero-tolerance - and we welcome that decision.'

In a letter to the parliament, Patten said the payments had been made since November 2000 with the full backing of the EU Member States and the European Parliament following the decision of the Israeli government to withhold monies owed to the Palestinians.

'The European Commission will never accept EU funds being diverted into the hands of terrorists,' he said. Claims that the commission continuously refused to investigate misuse allegations 'cannot be further from the truth'.

OLAF declined to say how and where its inquiry would be conducted, nor when it would be completed.