EU to restart direct aid to Palestinians

LUXEMBOURG, June 18 (Reuters) The European Union will resume direct aid to the Palestinians as part of efforts to support President Mahmoud Abbas's emergency cabinet, EU foreign policy chief Javier Solana said today.

''There will be part of the money that will be direct,'' Solana told reporters when asked if the EU would end an aid embargo imposed when militant Islamist group Hamas came to power in March 2006.

''It is very important that he is able to construct a budget and through that budget he will be able to help both people in Gaza and the West Bank,'' he added. Solana was in Luxembourg for a meeting of EU foreign ministers.

Western powers imposed the aid embargo because Islamist Hamas, which won Palestinian parliamentary elections in January 2006, failed to recognise Israel, renounce violence and accept interim peace deals. Hamas secured alternative support from Israel's arch-foe Iran.

Solana did not say when aid would restart or how much would be made available. The EU has for years been a major donor in the region and continued humanitarian aid to Palestinians during the embargo on contacts with the Hamas-led government.

His comments come after Israeli Prime Minister Ehud Olmert said Israel would release frozen tax revenues. The Bush administration in the United States plans to lift a ban on direct aid to Abbas's government this week.

''We want to try and support President Abbas,'' said German Foreign Minister Frank Walter Steinmeier.

Solana said the EU would look to use Salam Fayyad, the U.S.-trained economist whom Abbas named prime minister in place of Ismail Haniyeh of Hamas, as a conduit for funds.

''No doubt part of it will go through the account that when he was minister of finance he had established and he will have kept as prime minister, so it will be a direct relationship with the government,'' he said.

Washington wants to isolate Hamas economically, diplomatically and militarily in the Gaza Strip.

Yet some European diplomats have expressed misgivings about the new U.S.-Israeli strategy.

''The question is whether it is positive to distinguish between the good guys on one side, and the bad guys on the other. We want to avoid partition,'' said one EU official.

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