Thursday, November 18, 2004

Follow-Up: Europe's Palestine - Aid and Eyewash

In “Europe’s Palestine”, I allude to the fact that the European Commission in April 2003 announced the termination of its program of “direct budgetary assistance” to the Palestinian Authority. At the time, the program of “direct budgetary assistance” was replaced by a new program of “targeted” financial assistance with the cheerful if rather inelegant title “Reform Support Instrument”. Charles Tannock, a British Member of the European Parliament who played a leading role in the failed campaign to initiate a parliamentary inquiry into EU funding of the PA, responded favorably to this development. “The pressure we have been putting on the Commission has paid dividends,” Mr. Tannock remarked. Would that it were so. But I, very respectfully, beg to differ. On the Commission’s own account, the “Reform Support Instrument” includes “an €80 million finance facility targeted on the payment of arrears to small enterprises and social services.” In other words, the “Reform Support Instrument” continues to involve budgetary assistance, though it is no longer called “direct” assistance, but rather “targeted assistance”, since it is “targeted” to paying off the PA’s debts. Permit me to recapitulate the point about the “fungibility” of money that I made in “Europe’s Palestine”: “It lies…in the very nature of money – what economists call its 'fungibility' – that even if a financial contribution to a given budget is ostensibly ‘targeted’ to some particular expenditure, it necessarily frees up resources for all others. Given a range of expenditures, it is in fact meaningless to try to distinguish to which of them a particular revenue went. If, then, the PA has been financing terrorist attacks, the EU has been subsidizing them. And, given the massiveness of the evidence which has surfaced, no one seriously denies today that the PA has financed such attacks.”

In short, the EU’s replacement of its “direct” budgetary assistance to the PA by “targeted” budgetary assistance to the PA is nothing more than eyewash. If the EU is serious about wanting to assure that European taxpayer money does not go to the funding of Palestinian terrorism, there is only one thing for it to do: it must set as a condition for its aid that the PA cease sponsoring terror. In the short run, withholding aid until such time as this condition is fulfilled might worsen the lot of ordinary Palestinians in the territories. But it is hard to imagine that it would be more detrimental to their well-being than four years of Intifada have been.