Occupied Palestinian Territory
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Financial assistance to the Palestinians dates back to 1971 when the European Union made its first contribution to the budget of the United Nations Relief and Works Agency (UNRWA) for Palestine Refugees in the Near East. Since then, the European Union became the largest provider of development aid in the occupied Palestinian territory. From 1994 to the end of 2009, the European Union committed approximately €4.26 billion in assistance to the Palestinians through various geographical and thematic instruments. The overall objective of European Union support is to ensure the creation of a viable, independent and democratic Palestinian State living in harmony with Israel and its other neighbours.
Co-operation framework
Since the signature of the Barcelona Declaration 
in 1995, the Palestinian Authority was a full and equal partner in the Euro-Mediterranean Partnership. In this framework, an Interim Association Agreement on Trade and Co-operation governing bilateral relations between the European Union and Palestine Liberation Organisation (PLO) on behalf of the Palestinian Authority was signed in February 1997. The agreement provides a comprehensive framework for co-operation and the progressive establishment of a free trade area. Since the outbreak of the second Intifada in September 2000, the implementation of the Interim Association Agreement has become more and more difficult.
In 2004, the Palestinian Authority was amongst the first partner countries to be included in the European Neighbourhood Policy. The European Union prepared a Country Report [190 KB] 
describing the overall situation in the occupied Palestinian territory. In May 2005, the European Union and the Palestinian Authority agreed on an ENP Action Plan [50 KB] setting out jointly agreed priorities.
Co-operation programmes 2007-2013
PEGASE
PEGASE (Mécanisme Palestino-Européen de Gestion et d'Aide Socio-Economique), was launched on 1 February 2008. Building upon the Temporary International Mechanism (TIM), PEGASE supports the three year Palestinian Reform and Development Plan (PRDP) which was presented by Prime Minister Salaam Fayyad at the Paris Donor Conference in December 2007. PEGASE supports both recurrent costs of the Palestinian Authority (salaries and pensions, vulnerable Palestinian families, arrears due by the PA to the private sector) and development projects in the four sectors of the PRDP (governance, social development, economic & private sector, public infrastructure). Until the end of 2009, PEGASE also paid for the provision of fuel for electricity production in Gaza.
In 2009, the European Union committed €219 million for the Palestinian Authority's recurrent expenditures, €10.5 million for institution building projects, €22 million for the private sector reconstruction in Gaza, €1.5 million for the regional water project "EXACT" (Executive Action Team) and €18 million for support to public infrastructure.
In June 2010, the European Union committed more than €210 million for the Palestinian Authority's recurrent expenditure. A further €69 million were allocated for social and economic development and institution-building projects in support of the Palestinian Authority's "Two Year Plan for Statehood" announced in August 2009.
The new multi-year funding framework for 2011-2013 is currently under negotiation. For 2011 €295 million have been allocated to occupied Palestinian territory.
Other budget lines
Beyond the bilateral geographic instrument as defined in the multi-annual Indicative Programme, the occupied Palestinian territory is eligible for additional funds under the thematic programmes adopted for the financial period 2007-2013:
- European Instrument for Democracy and Human Rights,
- Non-State Actors and Local Authorities in Development,
- Environment and
- Migration.
The occupied Palestinian territory is also eligible under regional programmes such as Partnership for Peace (€10 million for 2007-2008 and €10 million for 2010) or the Cross Border Cooperation programmes; as well as under the new Erasmus Mundus External Co-operation Window programme , enhancing mobility and co-operation with European Union in the field of higher education and Tempus.
Furthermore, €40 million were allocated by the European Union under the Food facility to UNRWA's Social Safety Net Programme for 2009-2010. In 2009, the European Union also contributed €30 million through its Instrument for Stability (IfS) for UNRWA's major "humanitarian"/crisis prevention and recovery initiatives in Gaza, Lebanon and Syria.
Palestine Refugees
The situation of Palestine refugees continues to receive considerable attention from the European Neighbourhood and Partnership Instrument and other budgetary sources. From 2000, an annual average contribution of more than €100 million were provided to UNRWA. The European Union makes annual contributions to UNRWA’s General Fund of €66 million for the period from 2007-2010 under a "Joint Declaration". The European Union and its Member States together are the largest donors to UNRWA. This funding is used to cover the UNRWA's crucial core programme services in the areas of Health, Education and Social Services and is essentially used to pay salaries for teachers, doctors and social workers active in the refugee camps. In addition, the European Union provided support for UNRWA's organisational development reform (€1 million each year) since 2008 and provided an additional €1 million to support the organisation of UNRWA's Summer Games for refugee children in Gaza in 2010.
Moreover, the European Union provides humanitarian assistance (managed by DG ECHO) and support for specific projects. In 2009, DG ECHO's contribution to UNRWA's activities amounted to €21.33 million.
Co-operation until 2006
Since 1994 and the Oslo Accords, European Union's assistance focused upon development assistance and building institutions for a future Palestinian State. A range of projects were implemented in health, education, judiciary, support to Small and Medium Enterprises, infrastructure and environment, as well as capacity building in ministries of the Palestinian Authority. However, with the outbreak of the second Intifada in September 2000 and the severe deterioration of the economic and social conditions, which put into question the viability of the Palestinian Authority, the European Union modified its assistance to respond to the new situation, as did other donors.
Firstly, the European Union increased its grant assistance from an annual average of €137 million (1994-1999) to an annual average of €250 million (2000-2005). Secondly, assistance was re-orientated to provide more direct financial support to the Palestinian Authority while at the same time continuing to assist the Palestinian Authority in preparing itself for statehood, reviving the economy and addressing urgent humanitarian needs.
In 2006, following the formation of a Hamas-led Palestinian Authority government and the subsequent decision by Israel to withhold the Palestinian tax and custom revenues they collect on behalf of the Palestinian Authority, the humanitarian and socio-economic situation in the occupied Palestinian territory deteriorated.
In response to this fiscal, socio-economic and humanitarian crisis, the Quartet (group comprising the United Nations, the United States, the European Union and Russia established in Madrid in 2002 to mediate the peace process in the Israeli-Palestinian conflict) agreed to a proposal by the European Union in May 2006 to establish the Temporary International Mechanism to ensure direct delivery of assistance to the Palestinians.
Over the period 1994-2006 the European Union provided more than €2.7 billion in support to the Palestinian people.
More information
For information on the European Union policy towards the occupied Palestinian territory see European External Action Service website.
More information on the European Union relations with occupied Palestinian territory is available on the website of the European Union Technical Assistance Office in Jerusalem. For trade related issue see Trade Directorate-General website.