Project: Middle East and North Africa Programme

Academy Associate

While EU policy towards Palestinian economic development has long been subordinate to a stalled and dysfunctional peace process, this paper argues that the EU should rethink its policy and decouple economic development from the political process.

A Palestinian boy carries strawberries in a strawberry field in Beit Lahia, Gaza, December 2014. Photo: Ashraf Amra/Anadolu Agency/Getty Images.A Palestinian boy carries strawberries in a strawberry field in Beit Lahia, Gaza, December 2014. Photo: Getty Images.

Summary

  • The EU’s policy towards Palestinian economic development has long been subordinate to the political process between Israel and the Palestinians, which is not functioning. This paper calls for the EU to rethink its policy to find ways to decouple Palestinian economic development from the political process, to the greatest degree possible. If Palestinians achieve a sovereign state, they will need a viable economy to support it. Conversely, if this fundamental political goal is delayed for the longer term, Palestinians are still entitled to dignified lives until they realize it.
  • As an official European Neighbourhood Policy (ENP) country, Palestine has received more than €6 billion in EU aid since 1994. But neither has Europe’s vision of helping Palestinian economic development been realized, nor have its interests been met in ensuring the security of Israel or advancing stability in the region. After more than 20 years of an ailing peace process between Israel and the Palestinians, the majority of EU funding has been dedicated to supporting the Palestinian Authority (PA) through an unsustainable economic situation and to supporting the humanitarian needs of Palestinians instead of their development. The ‘myth’ of a Palestinian economy has come to prevail.
  • The framework of the last two decades – which predicated Palestinian economic development on political progress in Israeli–Palestinian negotiations – has failed. The very high rates of poverty and unemployment in the Palestinian territories – with joblessness averaging almost 25 per cent for the past decade and reaching 27 per cent in 2014 – sit at odds with the ENP’s principles and objectives. Political dependency and Israeli control of the Palestinian economy have reduced it to a political instrument for which the greatest lifeline is EU funding.
  • For the EU, three core priorities should lie at the centre of turning a vision of a Palestinian economy into a reality: the political drive to alter the framework of near-total control of politics over economic development; revitalizing the Palestinian private-sector to create employment opportunities; and continued support for the PA in achieving economic self-reliance. Previous efforts to deal with the second and third priorities have foundered because of the failure to deal with the first, the political ‘disablers’ that have undermined the impact of any attempts to create ‘economic enablers’ and construct an environment conducive to private-sector growth and institutional self-reliance.
  • The approach advocated by this paper is not the so-called ‘economic peace’. Economic development is not a substitute for political rights. As an educated and entrepreneurial people, Palestinians are capable of creating a viable economy that would support a sovereign state unreliant on foreign aid.
  • The EU policy shift would have to entail effective engagement of Israelis and Palestinians to address each other’s security requirements in accordance with international standards. This includes addressing Israel’s occupation and its ‘layering’ of measures under the name of security that undermine Palestinian economic development. A crippled Palestinian economy does not make Israel safer, but it meanwhile diminishes Palestinian dignity and hope for the future.
  • Such a shift in policy on the part of the EU would better align Europe with its own ENP objectives, and would be a critical positive response to political factors at play in the Middle East. It would fill the void arising from the reduced US focus on Israel and Palestine. However, this policy shift would be enhanced if it were fortified with a degree of US acceptance – if not support.