Excellencies, ladies and gentlemen,
It is a privilege to welcome you all to this AHLC meeting in Brussels. Let me first thank High Representative Mogherini for kindly hosting us here at the EU. I would like to extend a special welcome to Prime Minister Hamdallah, Minister Bishara and Deputy Director General Ben-Ari.
Eight months have passed since the AHLC last met in New York. The political context at the time was hardly promising in view of the breakdown of peace talks and another cycle of war in Gaza. Yet the subsequent Gaza conference in Cairo highlighted the opportunity – if seized – to turn things around.
In New York, I recalled that the three-party cooperation between the Palestinian Authority, Israel and the international donor community had from the very beginning rested on an unwritten contract: As long as the Israelis and Palestinians move forward on the political track, the donors will be ready to back them up on the economic track.
I will make four main observations.
There is no credible or viable alternative to the two-state solution. As far as the donors are concerned, there is no giving up on our commitment to the vision of an independent and sovereign Palestinian state living side by side with Israel in peace and security. But we need convincing reaffirmation from the parties – in word and deed – that, in this mission, we are still a committed partnership of three.
Some may argue that this is not the time to keep on calling for urgent resumption of final-status negotiations. The perception is that there is too little trust and too little will.
Yet, during my visit to the region a week ago, I cautioned that pressure for talks will soon increase. We are all impatient. I suggested that this meeting of the AHLC can become the first step on the rocky road back to rebuilding trust and a meaningful political process. Our most immediate priority must be to preserve and protect the Palestinian state institutions that have been painstakingly built over many years.
The IMF projects that the Palestinian budget deficit will reach around USD 500 million in 2015, based on a budget support estimate of USD 850 million. Till now, the PA has received USD 279 million in disbursed budget support.
In order for the PA to continue building their institutions and continue providing public services, donors must continue to do their part and honour their financial commitments.
For its part, the PA must strive to live within its means. The budget deficit is still at an unsustainable level. Prime Minister Hamdallah and Minister Bishara deserve praise for the way they managed the first quarter of this year. They deserve acclaim for seeking ways and means of increasing revenue, given the difficult circumstances. Redoubled reform efforts in the follow-up of its revenue action plan must go hand-in-hand with reinforced wage bill restraint.
However, the Palestinian Authority cannot break out of its structural donor dependence through fiscal discipline and institutional reforms alone. The fact remains that Israel holds keys to unlocking the potential of the Palestinian economy.
For one thing, it is a basic but essential requirement that Palestinian clearance revenues are calculated and transferred in a predictable, transparent, and unconditional manner. Therefore, I welcome the dialogue between the two ministries of finance to work towards this end.
The viability of a future Palestinian state will be determined not only by the strength of its institutions, but also by its ability to sustain economic growth. The potential of the private sector must be tapped in order to fuel the drive towards independence, which in turn requires access to resources and markets in Area C, East Jerusalem and abroad.
I welcome the steps that Israel takes to ease the closures, including for Gaza. Sooner rather than later, I hope, the Israeli closure regime can be completely reversed. The rearming of Gaza and the continued building of tunnels do not serve the interest of the Palestinian people, and must stop.
Protecting the state institutions ultimately makes little sense unless we halt the steady erosion of the future Palestinian state’s viability and the very ground on which it is to be built. Israel’s continued settlement expansions undermine serious negotiations and must stop. Moreover, it is bound to trigger more resistance and radicalisation, and not only in the West Bank.
Which brings me to my final point: Gaza – with its still unresolved issues.
We must do more to reconstruct and develop Gaza. I was positively surprised by the reports telling us that the growth in the West Bank reached 240% over the last 20 years – close to the average for Middle Income Countries. I was deeply worried by the bare 2% growth for Gaza over the same period.
The state-building project will never come to fruition without the reintegration of Gaza and the West Bank – politically, economically, and ultimately in terms of security. The Cairo conference called on the Palestinian factions, Israel and the donors to support a process that results in the Government of Palestine regaining all its functions and effective control in Gaza. The other stated requirement for the reconstruction of Gaza was the opening of border crossings to Israel in order to facilitate socio-economic development and accelerate economic recovery.
Seven months on, I take positive note that the donors have delivered USD 951 million of their pledges from the Cairo Conference, or 27 percent of the total of their three-year pledges for Gaza.
I take positive note, also, that the Gaza Reconstruction Mechanism is up and running. The increase of imports of building materials allowed in to Gaza is a step in the right direction, as is the modest exports that till now has occurred out from Gaza. Yet, both fall short of the needs.
As for the Palestinians, they need to reunite their land and people. I commend Prime Minister Hamdallah for his efforts to bridge the intra-Palestinian divide. It is high time all mainstream factions in Palestine put the national interest first and go for solving internal divides by the ballot box.
If we fail to offer the people in Gaza a hopeful way out of the impasse, darker regional forces will be waiting in the wings.
Against this backdrop, I am pleased that we all reconvene here in Brussel today. By doing so, we send an important message about our continued commitment to making the two-state solution a reality.