The European Commission has drawn up a plan to provide tens of millions of dollars to run Palestinian ministries and pay staff in a bid to prevent the collapse of essential services, an EU official said on Monday.
The official stressed the proposals were dependent on the endorsement of the United States to ensure lending institutions would participate without facing the threat of US sanctions.
The proposals will be discussed by European Union member states in Brussels on Tuesday and by other donor countries and international financial institutions in the city on Wednesday, said the official, who spoke on condition of anonymity.
The EU agreed this month to develop a temporary mechanism approved by the so-called Quartet of Middle East mediators to prevent financial collapse and unrest in the Palestinian territories after cut-offs of Western aid to the Hamas-led government.
The European Commission proposal covers three main areas.
"One is running costs and supplies in ministries providing essential services like health and education," the official said, speaking on condition of anonymity.
"There is also a section about covering costs of utilities such as energy, and the third part is on paying allowances - social welfare payments - to those working in essential areas."
The official said the proposal estimated $30 million a month was needed for such allowances, $7 million a month for supplies to ministries, and $6 million a month for utilities.
The official said the EU's focus would firstly be health, but other donors might have other objectives.
The proposal had a number of options, but there were pre-conditions: "International endorsement is important for international partner banks to have reassurances needed to participate. One of the pre-conditions is that banking sector issues should be resolved."
EU officials have been discussing the possibility of a World Bank Trust Fund to channel money to unpaid state employees, but Washington, although it backed the idea of a temporary mechanism as a Quartet member, has objected to paying salaries.
The World Bank has therefore been seeking assurances that any concern involved in implementing the initiative would not face sanctions, given that Hamas is listed as a terrorist organisation by Washington and Brussels. The EU official said the aim of the proposal was to support essential services "without working directly with the line ministries, and also to bring other donors on board".
Major Western donors, led by the United States, froze aid to the Palestinian Authority after Hamas came to power in March when it refused to recognise Israel, renounce violence or embrace existing interim Israeli-Palestinian peace deals.
The Palestinian Authority is now $1.3 billion in debt and has no income to pay long-overdue salaries to state employees.
Israel has been under strong EU pressure to release $55 million a month in revenues it collects on the Palestinians' behalf and has been withholding.
A senior Israeli official said last week Israel was prepared to release the revenues to the health sector and an independent auditor could use the funds to pay doctors or nurses.
EU states have differed on the scope of the mechanism, diplomats say. Some, like France favour a broad scope, channelling funds to pay salaries to keep health services, education and other social services running. Others, like Britain, want aid limited to health services, in particular emergency services.
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