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The EU had been withholding assistance from the Palestinian Authority for the last two-and-a-half years while demanding political reforms and the purging of alleged incitement from Palestinian textbooks

The Palestinian Authority is getting desperately needed help from the European Union to alleviate its financial woes after years of being cut off.

Visiting EU chief Ursula von der Leyen delivered the news to Palestinian Authority Prime Minister Mohammad Shtayyeh during a meeting in Ramallah on Tuesday.

Im very glad to announce that EU funds for 2021 can be dispersed rapidly. All the difficulties are gone. We have made clear that the disbursement will take place, said von der Leyen, president of the European Commission, during a joint appearance in front of reporters following the meeting.

After holding up its aid for the last two-and-a-half years, while demanding political reforms, a fight against corruption, and the purging of alleged incitement from Palestinian textbooks, the 27-nation EU is releasing hundreds of millions of euros to the PA.

It is important to have this EU funding to support the people, especially the most vulnerable, and it also helps to create the right conditions for economic opportunities; thats what we together should be working on, von der Leyen told reporters at the PA headquarters in Ramallah.

The European Union is the largest donor to the Palestinians, distributing an average of 600 million euros annually.

A visibly ecstatic Shtayyeh thanked the EU for the decision. Its a day of happiness for Palestinians and for Palestine, he said.

Europe has always been standing solidly in line with international law, for respect of international resolutions, and Europe has been very generous to Palestine, said Shtayyeh.

The funding will help pay the salaries of more than 160,000 PA civil servants, which comprise a substantial chunk of the West Bank economy.

Between 2008 and 2020 Brussels sent around $2.5 billion in direct budget aid to the PA.

European aid includes various sectors of the infrastructure in the West Bank, in the Gaza Strip, Jerusalem and Area C. It includes technical and police assistance, support for the private sector and civil society, and support for the price differentials resulting from the Ukraine crisis, Shtayyeh said.

This aid will inject liquidity into the Palestinian economy and bring about movement in the Palestinian economy. As far as the PA is concerned, the resumption of aid relieves pressure on the PAs treasury

The Palestinian economy has been in a dire crisis since at least 2018.

Dr. Nasr Abdel Karim, a professor of finance and economics at the Arab American University, told The Media Line that the resumption of EU aid no doubt is good news for the Palestinian economy. The PA is going through a stifling financial crisis and is unable to pay the full salary bill for its employees.

This aid will inject liquidity into the Palestinian economy and bring about movement in the Palestinian economy. As far as the PA is concerned, the resumption of aid relieves pressure on the PAs treasury, he added.

But its a temporary solution, according to Karim.

Without aid from the United States of America and the Gulf states, the government will continue to live in a cycle of deficit and public debt, he said.

Karim says the injection of EU financial aid is critical, but it doesnt mean the end of the PAs financial problems.

The PAs current deficit for the 2022 budget is one $1.2 billion.

Reinfusion of European funds will not solve the financial crisis because it is much greater than what the EU is giving, but it helps calm the situation and cool down the financial crisis, Karim said.

Jafar Sadaqa, an economics editor at the WAFA news agency in Ramallah, told The Media Line that the PA is on the verge of financial collapse, and an immediate intervention is needed.

It seems that there is a regional and international understanding and agreement that the situation in the Palestinian territories can no longer tolerate more pressures, and therefore this decision was expected, he said.

Sadaqa acknowledges that the help is timely, but not sufficient.

This support is important, regardless of whether it goes to the budget or to other sectors, but it is not sufficient to solve the crisis or to solve the financial crisis of the PA, he said.

Karim agrees, explaining that the crisis has to do with the Palestinian economy and its inability to generate sufficient revenues, as well as the large expenditures that the government undertakes.

He says that the question now is: if the aid helps solve the crisis this year, then what about next year?

Karim says that political steps, and deep reforms to the PA economy, are necessary.

The strategic solution lies in ending the occupation and reaching a sovereign state that has control over all its resources and the freedom to dispose of all its capabilities and to have freedom of movement. Also, there must be major internal political reforms, and democratic values, and an end to the internal Palestinian division.

Without those things, Karim says, these solutions remain prosthetic solutions.

During the nearly two years of COVID-19 pandemic restrictions, the PA relied on limited local resources to generate revenue, causing many Palestinians to slip below the poverty line. The World Bank reported that income fell in more than 60% of Palestinian households, and 20% of the previously employed workforce found itself unemployed.

The EU chief says the pandemic coupled with the war in Ukraine added more stress on the world economy including the Palestinians.

Palestine is slowly exiting the pandemic, but it suffers the consequences of the next crisis that we have and that is the Russian war against Ukraine. The Russian aggression has a devastating impact on food prices and on energy supply. And, indeed, Palestine is dependent on imports of Ukrainian cereals like many other vulnerable countries in the world too, she said.

Meanwhile, Shtayyeh called on Europe to exert pressure on Israel to allow Palestinians to hold elections in Jerusalem.

Today we need a political initiative in order to end the occupation, stop settlements, protect the holy sites, and Europe has stood by international law, international legitimacy, human rights and democracy, he said.

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European Union Resumes Financial Aid to the Palestinians - The Media Line