EU coordinates payments with Palestinian govt

JERUSALEM, May 3 (Reuters) The European Union and Palestinian Finance Minister Salam Fayyad have agreed to start making regular partial payments to Palestinian workers at the same time each month, European officials said today.

Palestinian officials said the coordinated payments, expected to begin arriving in accounts within a few days, would make it easier for government workers to cope with a year-old economic embargo of the Hamas-led government because they would receive more money on a schedule closer to a normal salary.

The coordinated payments could also help reduce political pressure on Fayyad and the unity government, which Hamas formed in March with President Mahmoud Abbas's secular Fatah faction in a bid to end internal fighting and ease the economic embargo.

Despite the power-sharing deal, tensions between Hamas and Fatah remain high and the Western aid ban on the Palestinian Authority remains in place.

The European Union said last week that aid from the bloc would continue to bypass the Palestinian government until it recognises Israel, renounces violence and abides by interim peace deals, as demanded by the Quartet of West Asia mediators and Israel.

Fayyad has promised to pay at least half wages, but the union that represents government workers said that was insufficient. The union has threatened to call an open-ended strike to demand full wages and back pay.

Starting this week, the EU-led Temporary International Mechanism (TIM) is paying ''allowances'' to all eligible Palestinian government workers and pensioners -- approximately 370 dollars each -- to coincide with separate payments by Fayyad.

A senior EU official said the mechanism's payouts totalled 28.57 million dollars, equivalent to about a quarter of the Palestinian Authority's monthly wage bill of 115 million dollars.

The EU official said the money was scheduled to arrive in the bank accounts of government workers at about the same time as payments Fayyad plans to make using other donor funds.

Two officials with the Palestine Monetary Authority said Fayyad planned to pay at least half salaries to government workers as early as Sunday in coordination with the European mechanism. It is unclear where Fayyad's money is coming from.

''There would, at most, be a one day difference'' between payments by Fayyad and the European mechanism, the EU official said.

Government workers have gone without full wages since Hamas Islamists came to power in March 2006. Some payments went through Abbas's office but only sporadically.

One Palestinian finance official said the coordinated payments could help the unity government by giving ''the impression that the beneficiaries of the TIM are getting their money from Palestinian Authority''.

EU officials said transfers from the European aid mechanism were clearly identified as such.

REUTERS RS RAI2130