By David Brunnstrom
BRUSSELS, May 18 (Reuters) -
Donors and financial institutions will meet in Brussels next week to try
to flesh out a temporary aid mechanism for Palestinians, still split over
its scope and how it should work, diplomats said on Thursday.
Donors suspended direct aid to the Palestinian Authority after Islamist militant group Hamas, listed as a terror group in Europe and the United States, won January elections. But fear of a humanitarian crisis has prompted them to work out ways of getting basic aid to Palestinians while bypassing Hamas.
Officials of the 25 EU states will meet on Tuesday and international financial institutions and donors on Wednesday to discuss the mechanism proposed by the quartet of Middle East mediators, a spokeswoman for the EU's executive Commission said.
The Commission, which has taken on the lead in setting up the mechanism, aims to have it running by next month, but it remains unclear exactly what it will do and who will run it.
Some EU member states, including France, want a broad scope, channeling funds to pay salaries to keep health services, education and other social services running, diplomats said.
Others, like Britain, want the scope limited to health services, in particular emergency services such as blood transfusions, dialysis, bandages and training.
"Scope is one of the difficult bits," an EU diplomat said.
EU officials have been discussing the possibility of a World Bank Trust Fund that would channel money to unpaid state employees, but diplomats said the Bank had been cautious about involvement in a complex and legally tricky project.
"The problem is to know what the responsibilities are," another EU diplomat said.
"It's easy to collect money, but then how do you distribute it and what is your relationship with the person concerned -- do you want to become the substitute for the employer of the different teachers, doctors and nurses?"
"It's also the political dimension," he said.
DELICATE BALANCE
"We are on the one hand saying we are intending to pursue our help to the Palestinians and on the other we are concerned to ensure no contacts with the government and Hamas because they are still on our list of terrorist organisations.
"This means a very delicate balance, which is not the normal work of the World Bank."
The Bank has said a prerequisite for its involvement would be for Washington and Israel to provide "explicit assurances" that any concern involved would not face sanctions.
Washington, as part of the quartet along with the EU, Russia and United Nations, endorsed the idea of the mechanism, but has not actually said it would contribute funds.
An Israeli official said on Thursday Israel was prepared to release Palestinian tax revenues it has been withholding into the mechanism to pay salaries of health workers. The EU had urged Israel to release the funds, totalling about $55 million a month, about a third what is needed monthly for salaries.
About 160,000 public employees have gone unpaid, raising the prospect of mass unrest. Palestinian President Mahmoud Abbas warned in a speech to the European Parliament on Tuesday of an "explosion of anger" among Palestinians.
The EU has made resumption of direct aid conditional on Hamas recognising Israel, renouncing violence and abiding by existing peace agreements.
EU officials say an alternative to World Bank involvement would be make payments to employees via local banks and describe them as "emergency allowances", rather than salaries.
A third diplomat said there were concerns about the costs of such a scheme as well as legal worries for the banks.
"They would want good guarantees they won't be sued, which they could be under UN Resolution 1373 for giving indirect support to a terror group," he said, referring to a requirement for states to "prevent and suppress the financing of terrorism".