EU paying bank charges for Palestinian aid

More than one million euros is being paid each month to banking giant HSBC to process European Union aid to impoverished Palestinians and key workers, British aid agency Oxfam claimed Wednesday.

"It is a fiasco that HSBC is being paid to act as a middleman," said Oxfam's director, Barbara Stocking, in a statement. "European states are wasting millions of euros of aid to Palestine through this bureaucratic scheme."

According to its own calculations based on EU documents, Oxfam said that between August and December 2006 the bloc spent 3,246,472 euros (4.2 million dollars) on bank charges to transfer cash to more than 140,000 Palestinians.

It said HSBC made eight euros per transaction, so that by the end of last year, the bank received more than one million euros a month in charges. Bank sources told AFP that Oxfam's figures were wrong and were in fact less than half what they claimed.

Stocking said the mechanism to deliver financial aid directly to individuals working in the social sector, pensioners and low-income families was too complex and was causing "irreparable damage".

British Prime Minister "Tony Blair needs to persuade Europe to put an end to this and resume direct funding of the Palestinian Authority (PA)," she added. HSBC spokesman Richard Lindsay told AFP: "We have a client confidentiality agreement with them (the EU) so we are not able to answer questions on it."

The EU stopped all direct aid to the PA in January 2006 after the hardline Islamist group Hamas won elections but resisted international calls for it to renounce violence, recognise Israel and abide by previous peace agreements.

In June last year, the Temporary International Mechanism (TIM) was set up to pay allowances to public sector workers - including nurses and teachers - pensioners and social hardship cases. Payments began in August.

The international aid and political boycott of the Hamas-led government has caused hardship on the ground, fuelling an economic crisis that has added to continuing tensions between rival factions, particularly in the Gaza Strip.

The United Nations relief agency has expressed concern about the effects of the funding freeze on ordinary Palestinians during the political stalemate.

Oxfam wants the TIM, which Britain played a leading role in setting up, to be scrapped and for European states to resume funding for essential services delivered by local and national Palestinian authorities.

Britain has provided 24 million pounds (36 million euros, 47 million dollars) for the Palestinians since Hamas came to power, the Department for International Development (DfID) in London said in December.

Total EU aid in the calendar year 2006 was 650 million euros, about 27 percent higher than in 2005, it added. A DfID spokeswoman told AFP Tuesday about 9.7 million pounds of the 12 million Britain committed directly to the TIM in July had been transferred so far. Britain will pay a further six million pounds to the scheme through the EU by the end of the financial year on March 31, 2007, she added.

"The TIM is the best alternative to ensure that Palestinian teachers, nurses and other public sector workers receive allowances, essential health supplies are available and water, sanitation and electricity services are improved," she said.

"The bank charges, which are under four percent of the total TIM budget for 2006-07, reflect the fact that each individual who receives a payment through the TIM goes through five different counter-terrorism checks, thereby safeguarding taxpayers' money."

AFP