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EU Press Release: Israeli Settlements constrain Palestinian Economy and increase PA's dependence on donor funds (6 July 2009)


European Commission Press Release - PR/26/2009 - Jerusalem - 6 July 2009

European Commission: Israeli settlements constrain Palestinian economy and increase PA's dependence on donor funds

Today the European Union made its seventh contribution this year to the Palestinian

Authority's payment of its civil service salaries and pensions both in the Gaza Strip and the

West Bank. Its contribution of over NIS 71 million (€ 13 million) was delivered through

PEGASE[1] and benefitted almost 80,580 civil servants and pensioners. At the same the

European Commission expressed concern that Israel's settlements in the occupied

Palestinian territory constrain economic growth, reduce the PA's revenues and are

therefore likely to keep the PA dependent on donor funding for many years to come.

"The current discussion on Israel's settlements in the occupied Palestinian territory focuses

heavily on the legal and political issues. And the European Union certainly takes the view that

all Israeli settlement in the occupied territory is illegal and that it seriously undermines progress

towards a two-state solution," said Mr. Roy Dickinson, the European Commission's Chargé

d'affaires in Jerusalem. "Yet the economic impact of settlements on the Palestinian economy and

the PA's revenues also deserves attention. The expropriation of fertile land; the settler-only

roads which carve up the occupied Palestinian territory, and the checkpoints and roadblocks

which exist solely to protect settlements: these all contribute to strangling the Palestinian

economy, thus they reduce the PA's revenues and make the PA dependent on handouts from

donors. And it is European taxpayers who pay most of the price of that dependence."

A 2008 World Bank entitled "The Economic Effects of Restricted Access to Land in the West

Bank" identified the existence of settlements as one of the main factors which means that

Palestinians are denied access to land, including large amounts of arable land in the Jordan

Valley. It found that these restrictions had important economic impact on most sectors of the

Palestinian economy: construction, tourism, agriculture, industry and public investment. Whilst

the exact cost to the PA's budget has not yet been calculated, it is likely to be considerable and to

contribute substantially to the PA's budget deficit of $1.15 billion in 2009. And as donors bear

almost the full cost of financing this deficit, it is European and other taxpayers who pay, whilst

donor financing in productive public investment is constrained.

PEGASE channels EU assistance to help build a Palestinian State, in accordance with the

priorities and needs identified by the Palestinian Authority. Launched by the European

Commission on 1 February 2008, it is the main financing mechanism of the European Union, the

largest donor to the Palestinians, and is open to contributions from other donors. Since the

beginning of 2009, the PEGASE mechanism has been used by the European Union to deliver

€202 million of direct financial support to the PA, in support of PM Fayyad's budget priorities.