EU backtracks on Palestinian aid freeze over Hamas attack

The European Union backtracked in disarray on Monday on an announcement that aid to Palestinians had been suspended in response to the attack on Israel by Hamas after EU countries complained the bloc's executive had overstepped the mark.

The confusion began after Oliver Varhelyi, the top official for relations with the EU's neighbours, said the European Commission was putting all its development aid for Palestinians, worth 691 million euros ($729 million), under review.

In a post on social media site X, Varhelyi - a Hungarian who is European Commissioner for Neighbourhood and Enlargement - also said all payments were "immediately suspended".

Varhelyi was nominated for his post by Hungarian Prime Minister Viktor Orban, a staunch ally of Israeli Prime Minister Benjamin Netanyahu.

The announcement prompted consternation among multiple governments, who had warned against cutting off aid to the detriment of Palestinian civilians and questioned whether the Commission had the authority to take such a decision.

The move also came as a surprise as officials had said earlier in the day that aid to Palestinians would be discussed at an emergency meeting of EU foreign ministers on Tuesday.

Spain, Portugal, Luxembourg and Ireland publicly voiced alarm while other countries did so behind the scenes, diplomats said.

"Our understanding is that there is no legal basis for a unilateral decision of this kind by an individual Commissioner and we do not support a suspension of aid," a spokesperson for Ireland's foreign ministry said.

More than five hours after Varhelyi's social media post, the Commission issued a statement confirming it had started an urgent aid review but also declaring that "as there were no payments foreseen, there will be no suspension of payments".

EU foreign policy chief Josep Borrell then sowed further confusion when he said the EU would not suspend "due payments" - right after the Commission had said no payments were foreseen.

The Commission declined to explain the discrepancy. But it clarified that humanitarian aid - which is separate to funds for development - would continue.

It said it was carrying out the review to "ensure that no EU funding indirectly enables any terrorist organization to carry out attacks against Israel".

Hamas militants killed some 900 Israelis and abducted dozens in the deadliest such incursion since the Yom Kippur war 50 years ago, prompting Israel to retaliate with its heaviest ever bombardment of Gaza, which has killed more than 680 people.

LONGSTANDING DIVISIONS

The EU's disarray reflected longstanding divisions within the 27-strong bloc over the Israel-Palestinian conflict, even as its members united to condemn Saturday's attack.

Germany and Austria said earlier on Monday they were suspending their development aid to Palestinians, while others such as Italy said suspending their aid was not up for discussion.

Europe is one of the main sources of aid to the Israeli-occupied Palestinian territories where the United Nations estimates that around 2.1 million people need humanitarian assistance, among them 1 million children.

Total EU assistance earmarked for the Palestinian people under the 2022 budget allocation was 296 million euros.

Neither the EU Commission, Germany or Austria differentiated between Gaza, the Palestinian enclave ruled by Hamas, and the much larger West Bank run by the Western-backed Palestinian Authority led by President Mahmoud Abbas, whose Fatah movement is a rival to Hamas.

In Germany, Development Minister Svenja Schulze of the Social Democrats said no payments were currently being made for bilateral aid projects as Berlin re-examined its engagement with the Palestinian territories.

"This is also an expression of our unbreakable solidarity with Israel," she told a news conference.

Germany's development ministry has earmarked 250 million euros in development funds for bilateral projects in the Palestinian territories for this and next year. It did not say how much of that it had already disbursed this year.

German politicians have in recent days emphasised their country's duty towards Israel and its security given the historic responsibility for the Holocaust. The Israeli flag was projected on Saturday night onto Berlin's landmark Brandenburg Gate.

Still, some politicians have pushed back against the decision to suspend aid, saying Hamas but not all Palestinians were responsible for the attack.

Moreover a spokesperson for the Greens-run foreign ministry said it would continue to disburse the 73 million euros it had earmarked for Palestinians - which were separate to the development ministry funds, and most of which had already been spent.

Austrian Foreign Minister Alexander Schallenberg said the country was suspending development aid totalling around 19 million euros ($20 million) for a handful of projects.

Neutral Austria's ruling conservatives have adopted one of the most pro-Israel stances in the European Union in recent years. The Israeli flag has been hoisted above the chancellor's office and the Foreign Ministry after the shock Hamas assault.