EU pledges millions to Palestinians

BRUSSELS - The European Union executive pledged 440 million euros (314 million pounds) of grant aid to the Palestinians on Monday as international donors gathered in Paris to offer financial support for a new Middle East peace effort.

A large proportion of the funds will contribute to a Palestinian Reform and Development Plan to be presented at the donors' conference by Palestinian Prime Minister Salam Fayyad, a statement from the European Commission said.

The assistance will be disbursed under a new Palestinian European Aid Management mechanism, known by the French acronym PEGASE. This will channel funds directly to a finance ministry account controlled by Fayyad, who also runs that ministry.

The money, available from March, will go to support improvements in governance and areas such as health, education and infrastructure, an EU official said.

PEGASE will replace and have a broader scope than a Temporary International Mechanism that channelled aid for social allowances to needy Palestinians, fuel and health services.

But it will continue to bypass Hamas, the militant group that seized control of the Gaza Strip in June. "Everything is still geared to avoid money going to Hamas," the official said.

The European Commission is the largest aid donor to the Palestinians. It has provided 550 million euros in 2007 and money from member states has brought the total to one billion. The new pledge is also much larger than the 170 million euros initially committed at the start of the year.

Delegations from more than 60 states meeting in Paris are expected to offer some $5.6 billion to help lift the Palestinian economy and underpin a new U.S.-sponsored peace effort launched in Annapolis late last month.

EU External Relations Commissioner Benita Ferrero-Waldner called the European funding "a significant pledge", but said it was essential that other donors, including Arab states, also provided funds.

Ferrero-Walder said aid could work only if it complemented peace efforts. "We are determined to support and accompany this process which will only be successful with a comprehensive approach involving all actors in the region," she said.