MEPs have been especially concerned that some of the funds, which amount to ? ¬246.3m (£175.8m), may have been funnelled into the hands of terrorist organisations.
The parliamentary working group will draw up a report by the end of this year. It will focus on checking whether Brussels had effective financial measures in place to monitor the hundreds of millions transferred to the Palestinians from November 2000 to December 2002.
MEPs decided to launch the inquiry this March after hearing of persistent allegations that EU money was being used to pay for Palestinian schoolbooks that incited hatred against Israel and possibly even terrorism.
The opening of the investigation coincided with the restarting by the European Commission of a grant aiding the PA, following the accession of Mahmoud Abbas as Palestinian prime minister and Israel’s transfer of tax revenues to his authority.
Although spending will be high – ? ¬245m (£175m) this year – the commission has changed its funding methods to better control how the money is spent.
According to a Brussels memorandum, in the past EU funds were paid into a PA Single Treasury account for general budget expenditure, supporting ‘core activities’ of the administration and allowing the PA wide powers over spending these grants.
Instead, the new assistance will be targeted and ring-fenced for specific programmes. For instance, money will help the authority meet unpaid bills with private sector suppliers and social services commitments it has not met since losing financial support from Israel.
The commission note read: ‘Helping the PA to pay off its arrears in these areas will benefit the economy by reducing pressure on enterprises that have been starved of money due to them, and will help boost basic social services, in particular health.’
Some of the money will be placed in a World Bank administered trust fund, allowing greater control.
For instance the commission wants to spend ? ¬5.5m (£3.9m) on hard-pressed universities in the West Bank and Gaza.
EU Commissioner for external relations Chris Patten said: ‘Israel’s resumption of tax transfers allows us to change the form of our assistance, but our objectives remain the same: a stronger PA administration, better conditions for the Palestinian people and a continuing process of reform.’
Go to www.europa.eu.int for more on this.
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