(2004/C 33 E/015)

WRITTEN QUESTION P-3173/02

by Charles Tannock (PPE-DE) to the Commission

(30 October 2002)

Subject:   EU funding of the Palestinian Territories

In an exchange which took place in the European Parliament on 22 October 2002 over the issue of whether or not a Parliamentary Commission of inquiry should be set-up to investigate allegations that EU funds have been used to fund terrorist activities in the Palestinian Authority territories, Commissioner Patten suggested that the effect of such scrutiny by the Parliament would be to dry-up assistance to the Palestinian Authority because of the psychological effect which it would have on those on the ground required to disburse funds. The Commissioner also made the point that the Americans, the Israelis and the UN all look to the EU to provide humanitarian funds, and he has argued in the Foreign Affairs Committee that to stop funding the Palestinian Territories altogether would be counterproductive to the extent that it would help to generate wider social tensions, more hatred and ultimately more terrorism. These are all, clearly, serious arguments.

There are many of us who would accept that the primary focus of our activities must remain the desire to work towards a two-state solution which affords security to the State of Israel and dignity to the Palestinians. There remain concerns, however, that EU funds are directly implicated in acts of terrorism carried-out against women and children, and that more can be done on the ground to ensure that the opportunities for such abuses are reduced. For example, there are reports that EU monies are paid towards the salaries of people who do not exist, and that these funds are then misused. The Commission has indicated that the IMF has played a role in monitoring the use of EU funds and yet in the 27 May edition of Der Spiegel it is reported that the IMF official responsible has admitted not only that he does not know how each euro would be spent but that it was impossible to do an effective audit. He went on to add that the IMF only verifies if the sums of the Palestinian Authority's are going to the respective department in the correct amounts.

Could the Commission clarify the role of the IMF in the monitoring process? Is it normal for the IMF to be involved in monitoring EU funds and who is responsible for the ‘stringent system of ex-ante and ex-post controls’ to which the Commissioner has referred in the past? Who, for example, is responsible for ensuring that everyone who receives a salary exists and is involved in the work for which he or she is being paid?

Answer given by Mr Patten on behalf of the Commission

(10 December 2002)

On 4 November 2002 Commission officials met with Members of the Parliament from Budgetary Control Committee (Cocobu), Committee on Budgets (COBU), Foreign Affairs Committee (AFET) on EU aid to the Palestinians. A similar meeting was held on 14 November 2002 between Vice-President Podestà and Commission officials. A series of documents on the management of Community funds to the Palestinians were handed over to the Members of Parliament and to Mr Podestà at these meetings.

As regards ex-ante and ex-post controls, EU Direct Budgetary Aid is a financial contribution that accrues to the Palestinian Authorithy (PA) budget together with tax transfers from the Israeli government, and other PA revenue, as well as other donor budget support. All these funds serve to finance PA public expenditures in general under the control of the PA Ministry of Finance. Neither EU funds nor the other donor funds are earmarked for specific expenses, and therefore, cannot be attributed to any specific payment. However, the International Monetary Fund (IMF) monitors if the budget in its aggregates (overall expenditure, wages, non-wage expenditure, arrears) is executed in line with the monthly expenditure plan that has been agreed with the IMF and the EU. All payments to the budget, including the most recent transfers of tax revenue withheld by the Israeli government (July, August and October 2002) have been made on the basis of this monitoring mechanism. Furthermore, in order to improve control of public expenditure in general, conditions attached to EU budgetary assistance to the PA foresee the establishment of both internal and external audit systems that correspond to international best practices. These measures are part of an overall fiscal and administrative reform program that has been announced by the Palestinian Authority in July 2002 and which has been endorsed by the Quartet (United States, European Union, Russia, United Nations Secretary General). As confirmed by the most recent report of the task force (local level) on the progress of reform (20 September 2002), the Ministry of Finance has hired a chief financial controller and has deployed nine financial controllers in nine ministries, the objective being to have forty financial controllers in major ministries and spending agencies. Necessary steps to strengthen the existing external audit system are planned for the coming months.

Recently, the control over the payroll of the West Bank staff has been transferred to the Ministry of Finance. Therefore, the Ministry of Finance is the responsible entity for the control of the payroll, new recruitment and the respective allocations for payment of the salaries to the Ministries concerned.