Arab League denies unable to give Palestinians aid

CAIRO, May 13 (Reuters) The Arab League today denied that it was unable to transfer aid to Palestinians, saying that the issue, including paying salaries to Palestinian Authority employees, was still under discussion.

An official from Palestinian President Mahmoud Abbas's Palestinian Liberation Organisation said on Thursday the Arab League head told Abbas that the pan-Arab body could not transfer an estimated 70 million dollar to the 165,000 employees' accounts.

''I did not contact the Palestinian president at all and I have not spoken to him since we met in Paris 10 days ago and discussed the best way to send this,'' Arab League Secretary-General Amr Moussa told journalists in Cairo.

An Arab League official said the body had not abandoned efforts to send the money it had collected to Palestinians.

Hamas, considered a terrorist organisation by the United States, was hoping the League could sidestep U S restrictions by depositing the money directly into the employees' accounts.

Under U.S. law, any foreign bank that refuses to cooperate with the United States in cutting off funding to Hamas risks having its U.S. assets frozen and its access to U.S. financial markets denied.

The Hamas-led Palestinian Authority is 1.3 billion dollar in debt and has no income to pay long overdue salaries, mainly due to Israel's decision to freeze the transfer of tax revenues it collects on behalf of Palestinians, and to Western suspension of aid following Hamas's January election victory.

The Quartet of the United States, European Union, Russia and United Nations raised Palestinian hopes this week with a promise to funnel aid to Gaza and the West Bank, while bypassing the Hamas-led government. But no money has reached the Palestinians yet.

''I am in contact with European commissioners who are charged with studying this issue and I am discussing with them the best way to send the money the League has directly to the Palestinian side,'' Moussa said.

The European Union backs a plan to set up a trust fund for aid to pay, at most, salaries to health and education workers, who make up a quarter of the Palestinian Authority's workforce.

Washington opposes salary payments.

In New Delhi, India announced 2.23 million dollar in aid to the Palestinians, saying it was concerned at hardships faced by the people there.

REUTERS SY VC2233