In a rare move, the European Union announced on Tuesday that it was suspending $42 million in aid to Palestinians as a result of lack of budgetary discipline.
EU commissioner for external relations Benita Ferrero-Waldner explained that the sum represented half of $84 million in aid, and that until certain benchmarks were fulfilled, the remainder of the funds would not be transferred.
"We have a long-term commitment with the Palestinian people that we would like to improve their living conditions (but) we are not only pumping money into the Palestinians without asking for very clear benchmarks," Ferrero-Waldner stated while on a visit to the region ahead of upcoming Palestinian elections on January 25.
"There has to be a credible finance minister, but there also has to be a budget and the budget should also remain within the limits of what the budget has foreseen," she added, according to Reuters.
The state of the Palestinian economy has deteriorated significantly since the beginning of the most recent Palestinian uprising which began in 2000.
The economies of the West Bank and Gaza have been further harmed by alleged corruption as well as violence which have discouraged donations and investment in Palestinian infrastructure and business.
Palestinian official calls on Israelis to invest in PA
Director General of the Palestinian National Economy, Ministry Saeb Bamya, revealed on Tuesday that the Palestinian Authority Council and private Palestinian businessmen were inviting Israelis to begin investing in the Palestinian Authority, according to Ynet.
Bamya, who made the comments to the Israel Manufacturers Association's magazine, stressed that joint economic ventures would help alleviate Palestinian poverty, stabilize their economy, and ultimately provide safety for Israeli as well.
He added that if economic rehabilitation fails for the Palestinians, the result will be that extremist groups will gain strength.
Bamya explained that construction, energy, textile, furniture, stone and marble, and tourism are potential areas of cooperation between Israeli and Palestinian entrepreneurs.
He added that the field of information technology industry in the PA was another area in which Israelis may want to invest.
Bamya also criticized Israel's refusal to allow Palestinians to operate the Dahaniya airport in the Gaza Strip, which he said would significant aid in the rehabilitation of of the Palestinian economy.
He went on to state that the Palestinian Authority needs Israel to provide jobs for Palestinians for at least the next seven years until the Palestinian economy stabilizes and becomes independent.