MEPs accuse Palestinian Authority of using aid for terrorism

The future of Europe's multimillion-euro aid package to the Palestinian Authority was in question yesterday as MEPs pressed for an investigation into claims that EU cash may have been siphoned into terrorist causes. With a quarter of the European Parliament backing calls for a formal investigation, MEPs are heading for confrontation with Chris Patten, the European commissioner for external relations, who says there is no evidence of serious problems.

At stake is the future of the European Commission's €10m (£6.6m) monthly payment to support the authority. Brussels is its most important single contributor. Mr Patten says the authority is the only credible interlocutor for the Israeli government and sees its survival as vital to prospects of peace in the region.

Brussels officials admit they cannot account for every penny spent by the authority, but say there is no evidence of significant malpractice.

Last year, the Israeli government submitted a dossier that claimed 10 per cent of the Palestinian Authority's budget was spent on activities that were not transparent. The documentation also claims to show that Yasser Arafat, the chairman of the authority, had signed bank transfers to activists involved in terrorism.

Other factors have fuelled the call for an investigation. Salam Fayyad, the respected Palestinian Finance Minister, has admitted the system is open to corruption. And assurances from Mr Patten that the EU's funding arrangements are supervised by the International Monetary Fund have begun to look less convincing.

Thomas Dawson, director of the IMF's external relations department, says the fund "does not monitor or control every item in the budget". He added: "This obviously is an auditing function that goes far beyond the fund's present mandate."

The European Commission has agreed to the creation of an ad hoc group to look into the claims. But, because of the support of one quarter of MEPs, there will be a debate on the issue, which could lead to the establishment of a formal committee of inquiry. That would have much wider powers to question officials, including Mr Patten, and to travel to the region if necessary.

Ilka Schröder, a German MEP, accused Mr Patten of "winking approval of terrorist attacks funded by the EU" and said: "Since there can be no investigations expected from Mr Patten or from the rather short-sighted Commission president, Mr [Romano] Prodi, the parliament will have to take action."

Charles Tannock, a British Conservative, said it was "the Palestinian people who have been cheated" by corruption of the funds being "implicated in terrorist causes". He added that he was "astonished by the hostility and resentment" in the European Commission to a formal investigation.

Willy De Clerq, a Belgian Liberal, said: "We are not for Israel, for Palestinians or against them. We want the truth, that's all. Transparency is the key. Verification will help the credibility of the EU."

A spokesman for Mr Patten said the IMF had "better and more intense controls" than those in place anywhere else and added that Israel, which was obliged to give customs duties to the authority, made payments through the same system, via Arab Bank in Gaza.

But Israel says it has to make payments this way through its international obligations. Last month, Mr Patten said: "We have found no evidence that EU moneys have been misused by the Palestinian Authority in order to finance terrorist activities."

In 2000-01, the total aid paid to the Palestinians by European taxpayers was at least €330m, mostly in budgetary support and humanitarian aid.