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Donors Pledge $7.4 Billion To Boost Palestinian Economy

International donors pledged $7.4 billion for the Palestinians at a conference in Paris on Monday, a massive sum that beat the Palestinians’ own expectations, French Foreign Minister Bernard Kouchner said.

“The real winner today is the Palestinian state,” Kouchner told a news conference after the gathering of nearly 90 countries and international organizations. “We wanted $5.6 billion, we have $7.4 billion, not bad.”

According to Kouchner, $2.9 billion will be transferred to the Palestinian government in 2008, and the remainder of the sum will be transferred over the next three years.

The Palestinian government had asked for $5.6 billion over the course of three years to shore up its economy amid a renewed push for a Palestinian state.

Topping the donors’ list were the European Union, which pledged $630 million, the United States, with a $555 million pledge, and Saudi Arabia, which will donate $500 million.

At the Paris conference, Foreign Minister Tzipi Livni told representatives from more than 60 donor countries and international organizations that Israel is committed to the establishment of a Palestinian state.

She said that economic development in the Palestinian Authority and maintaining Israel’s security were codependent factors.

“We need you to know that Palestinian welfare and Israeli security are not mutually exclusive interests,” she added.

She told donors that a three-year Palestinian reform plan is a serious effort to build the foundation of a Palestinian state.

“We welcome the Palestinian reform plan as a serious effort to build the basis for a responsible Palestinian state that the Palestinian people so deserve and that peace so needs,” Livni said.

Palestinian President Mahmoud Abbas on Monday called on Israel to freeze West Bank settlements without excuses, using the high-profile platform of the international donors conference to deliver his appeal.

“I’ll be eager to implement all our commitments under the road map, and I expect the Israeli side to do the same, comprehensively, and without excuses, by us or by them,” Abbas told delegates. “I expect them to stop all settlement activities, without exceptions.”

Delegations were expected to offer around $5.6 billion – as requested by Palestinian Prime Minister Salam Fayad – to help lift the Palestinian economy and underpin the renewed Middle East peace talks.

During his address to the conference, Abbas also ruled out dialogue with Hamas, saying that without international support Gaza was headed for disaster.

“I shall not accept dialogue [with Hamas], based on a fait accompli,” Abbas said, referring to Hamas’ repeated calls to resume talks on a national unity government.

From international Mideast envoy Tony Blair to French President Nicolas Sarkozy, participants called for urgent action, saying a new chance for an Israeli-Palestinian peace deal must not be missed. Peace talks resumed last week after seven years of diplomatic deadlock, and international aid is seen as key to making the process work.

“We will not rest until we have that two-state solution a reality in this region of the world,” Blair, a co-sponsor of the conference, told the conference.

At the start of the conference, Sarkozy urged fast international support toward creating a Palestinian state, calling the meeting a turning point in Middle East peace efforts.

“What we must do now is work together before the end of 2008 for the creation of an independent, democratic, viable Palestinian state, Sarkozy said in a speech to representatives at the conference.

“Be generous, be audacious. Peace depends on it and this peace will help all the world,” he told delegates, which included U.S. Secretary of State Condoleezza Rice and Middle East envoy Tony Blair.

The Norwegian co-chairman of the conference, Jonas Gahr Stoere, said Monday he was confident that donors could meet a $5.6 billion target in aid for Abbas’ government.

Stoere, speaking after a break in the Paris meeting, pointed to indications that “we may be around up to 2 billion for next year, so then hopefully you can multiply that by three. Palestinian Prime Minister Salam Fayad is asking for $5.6 billion from 2008 to 2010. I am confident that we can make that,” he said.

Some of the biggest donors announced their pledges at the start of the conference. The European Union said it would give $630 million in 2008 and Norway pledged $140 million a year for three years. Britain, France and Germany announced a combined $1.08 billion over three years.

The U.S. has announced it is pledging about $555 million for 2008. However, the money includes about $400 million that the White House announced but has not been approved by Congress.

Western donors have urged Arab states to do more. Since 2002, Arab League members have been promising the Palestinians $55 million a month but have not always paid in full.

Meanwhile, Japan on Monday said it would pledge $120 million to the Palestinians, Israel Radio reported.

The one-day meeting is the financial sequel to the launch last month of the first peace negotiations between Israelis and Palestinians in seven years. The talks are aimed at achieving an agreement on Palestinian statehood by the end of 2008.

“To turn this dream into reality we have organized this conference in Paris,” French Foreign Minister Bernard Kouchner told Europe 1 radio before the summit began on Monday.

“It is not just a question of money. It is a donors conference but also a political conference,” he added.

Kouchner also urged ordinary Palestinians to turn their backs on extremism and support Abbas. “We need to show moderate Palestinians that democracy is the only solution to live in peace,” he said.

The Palestinian Authority has received donations totaling about $10 billion from the international community since 1993.

The foreign ministers of all the Arab states other than those of Yemen, Iraq and Syria – which are apparently not planning to provide the Palestinians with financial assistance at present – will be participating in the conference.

While the meeting will focus on plans to boost the Palestinian economy, envoys from dozens of countries are expected also to discuss outstanding contentious issues.

Delegates to the conference are also likely to issue a statement calling on Israel to remove roadblocks in the West Bank, European diplomatic sources said over the weekend.

Representatives from the Arab states taking part in the conference are expected to criticize Israel sharply over the issues of roadblocks, the closure of border crossings into Gaza, and the planned construction in the disputed East Jerusalem neighborhood of Har Homa.

“We need a clear-cut Israeli decision concerning this issue,” said Palestinian spokesman Nabil Abu Rdainah.

U.S. Secretary of State Condoleezza Rice said the dispute was “ever more reason that it’s time to get an agreement” and appealed to both sides not to “consider every bump in the road to be a barrier.”

“There is an assumption here that there is not going to be turbulence in this process. There is. I don’t care how much you talk to people before, I don’t care how much work you do. There will be turbulence,” Rice told reporters as she flew to Paris.

An Israeli diplomatic official said Sunday that Israel is prepared to remove West Bank roadblocks. “There is Israeli willingness to remove roadblocks, and the subject was also raised while the PA’s economic plan was being formulated, in coordination with Defense Minister Ehud Barak,” the official said.

At the same time, members of the Israeli delegation noted that the country’s security needs must be taken into consideration. The government is also expected to be open to continuing to transfer tax revenues, collected on behalf of the Palestinian Authority, to the Palestinian government.

Foreign Minister Tzipi Livni, who will be addressing the conference, told reporters in Paris on Sunday that Har Homa construction was not a new undertaking and that it was important to progress toward the shared Israeli-Palestinian goal rather than getting caught up in mutual accusations.

Livni also said Israel is a full partner in the process that will lead to the establishment of a Palestinian state. The foreign minister is scheduled to meet Monday with U.S. Secretary of State Condoleezza Rice.

In the days preceding the conference, Palestinian spokesmen and the World Bank emphasized their demand that Israeli roadblocks be removed to allow people and goods to move more freely within the West Bank.

Palestinian Prime Minister Fayad said freedom of movement was necessary for his economic plan to succeed, and he and Abbas are due to call on Israel to remove the blockade from the Gaza Strip as part of an effort to revive the Palestinian economy there.

Fayad’s plan calls for some 70 percent of the requested financial aid to go toward the Palestinian Authority’s ongoing expenses, such as salaries and welfare payments, with the rest going toward development projects, including industrial parks and factories in the West Bank and Gaza.

French President Nicolas Sarkozy was slated to make the first speech at the conference, which began at 10:30 A.M. Israel time. He was followed by Palestinian President Mahmoud Abbas, who was expected to call for active international involvement in the region. Abbas has revised the speech previously outlined in Haaretz and was slated to make an explicit reference to Israel’s announcement following last month’s Annapolis conference that it would be building some 300 new housing units in Har Homa.

A large proportion of the funds pledged at Monday’s conference will contribute to a Palestinian Reform and Development Plan to be presented at the donors’ conference by Palestinian Prime Minister Fayad, 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 Fayad, 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 channeled 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.

In 2007, the EU initially pledged $245 million but ended up contributing$798 million for that year because of deepening poverty in the Palestinian territories.

EU External Relations Commissioner Benita Ferrero-Waldner said Monday she could not say yet how much the EU would contribute in 2009 and 2010 since she didn’t know what the available EU budget would be, but suggested the aid would roughly hold steady. That would make the overall EU contribution a substantial chunk of the total pledged Monday.

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