EU auditors call for overhaul of financial support system to Palestinian Authority

The European Court of Auditors (ECA) Wednesday published a report on the European Unions PEGASE Direct Financial Support to the Palestinian Authority (PA) calling for its revision. PEGASE is the French acronym for "European-Palestinian Management and Socio-Economic Help." "While the European Commission and European External Action Service (EEAS) have succeeded in implementing the support to the Palestinian Authority in difficult circumstances, there are a number of aspects of the current approach that are increasingly in need of an overhaul" Hans Gustaf Wessberg, the ECA Member responsible for the report, told a news conference in Brussels. "Although some important results have been achieved, there is a need for major revisions such as encouraging the PA to undertake more reforms, notably in relation to its civil service," he stated. Wessberg also called for ways to be found to bring Israel to take the necessary steps to help ensure that PEGASE DFS is effective. The report notes that the European Union has provided more than 5.6 billion euro (USD 7.7 bn) in assistance to the Palestinian people since 1994 to support its overall objective of helping to bring about a two-state solution to end the Israeli-Palestinian conflict. Since 2008, its largest programme in the occupied Palestinian territory has been PEGASE DFS, which provided approximately 1 billion euro (USD 1.38 bn) in funding from 2008 to 2012. The European auditors examined if the European Commission and the EUs foreign service, called European External Action Service, had managed this programme well for that period. PEGASE DFS seeks to help the PA to meet its obligations to civil servants, pensioners and vulnerable families, maintain essential public services and improve public finances. Wessberg noted that PA employs some 170,000 civil servants. While the programme made a significant contribution to covering the PAs salary bill, the increasing number of beneficiaries and declining funding through PEGASE DFS from other donors lead to serious delays in the payment of salaries by the PA in 2012 which led to unrest amongst the Palestinian population, says the report. The report underlines that "threat to the financial sustainability of the PA can, to a considerable degree, be traced to the manifold obstacles raised by the Government of Israel to the economic development of the occupied Palestinian territories and so also undermining the effectiveness of PEGASE DFS." PEGASE DFS has contributed to essential public services but a considerable number of civil servants in Gaza, due to the political situation, were being paid without going to work and providing a public service, it says. It recommends that funding of salaries and pensions from PEGASE DFS for civil servants in Gaza "to be discontinued and redirected to the West Bank." It concludes that despite the large PEGASE DFS funding, the PA was facing a severe budget deficit in 2012 which was also threatening to erode Public Finance Management (PFM) reforms. Meanwhile, in its reaction, the European Commission and EEAS released a statement welcoming todays report from the Court of Auditors. "The report makes a number of recommendations on how to improve our co-operation with the PA. The Commission and the EEAS agree to review the PEGASE mechanism and take the recommendations made by the Court into account," it said. "The issues surrounding the civil servants who are not able to work in Gaza are complex in the circumstances prevailing in the Gaza Strip. The Commission and the EEAS consider that the PA must continue supporting its workers in Gaza as a key element of maintaining its presence in Gaza and the unity of a future Palestinian State," said the statement. The Commission and the EEAS have actively sought to ensure Israeli co-operation, it noted.