The Arab League summit in Riyadh on 28-29 March 2007 has refocused international attention on the prospects of diplomatic movement in the Palestinian-Israeli conflict. The opportunity for regional involvement to contribute to a settlement follows Saudi Arabia's facilitation of the Mecca agreement on 8 February which led to the formation of a Palestinian national-unity government involving a coalition between Hamas and Fatah (with a few non-aligned ministers). At the same time, the establishment of the new Palestinian government raises the question of re-engagement with the Palestinian Authority (PA) from another quarter: Europe. How should Europe respond to this shifting political context, and what principles does it need to apply?

The European Union's decision after the elections of January 2006 to boycott the Hamas government had a number of negative effects. One of the most serious is that progress has been undone on Palestinian institutional reform, an area where European governments and the European commission had begun to establish a useful and lead role. A unity government between Hamas and Fatah should be used as a platform from which to renew this reform-oriented focus of EU policies, still the policy area where Europe can best add value to the plethora of initiatives developed by other international actors. But there are also lessons to be learned in how Palestinian reform should be supported and in how "low-politics" EU instruments can be most effective if pursued as part of a broader European political engagement.

Reviving reform

European Union support for Palestinian institutional reform had begun to make headway. The EU was using a skilful mix of funding, incentives and political conditionality. In doing so, it was walking a very thin line. On the one hand, it sought to nudge along Palestinian reform without detracting from the fact that a fully functioning democracy depended most essentially on the end of occupation. On the other hand, by the late 1990s it had become clear that unduly neglecting underlying reform was militating against the prospects for peace.

Richard Youngs is senior research fellow at the Fundación para las Relaciones Internacionales y el Diálogo Exterior (Fride) in Madrid

This article is an edited version of report by Richard Youngs for Fride, February 2007

Also by Richard Youngs in openDemocracy:

"Europe's energy policy: economics, ethics, geopolitics"
(10 January 2007)

The EU was criticised from both sides, variously for being either too critical towards or too indulgent of the Palestinian Authority political elite. But this was certainly the area where the EU became lead funder and exerted no small influence. It deployed both the Euro-Mediterranean Partnership (Meda) and European Initiative for Democracy and Human Rights (EIDHR) funding, the latter a means of channelling aid in a way that did not require acquiescence from the Palestinian government. It was the area of policy where the EU did use political pressure and where coordination between different EU donors on the ground was said to be good.

It is also the area that has most suffered since the January 2006 Palestinian elections. The EU-designed "temporary international mechanism" (Tim) has provided funding for emergency health, social and fuel costs - and indeed it is regularly pointed out that in overall terms European aid had paradoxically increased since the boycott was imposed. But the Tim might be likened to covering problems with a sticking plaster. Indeed, it actually bypasses many of the good governance mechanisms (such as the single treasury account) that the EU had successfully pressed for. Under the Tim it is not clear who decides who gets what, and diplomats complain of money draining into "a black hole". The MEDA-funded judicial-reform programme was one illustrative governance reform casualty of the boycott.

The well-known three conditions imposed on Hamas (recognition of Israel, an end to violence, and acceptance of past PA agreements) include nothing that relates to standards of democratic governance or issues of civil rights within the occupied territories themselves. The shortcomings of democratic governance and accountability are issues of considerable day to day concern for Palestinians, and at the root of much of the internal conflict within the occupied territories, which of course then feeds negatively into the peace process. Even if the three conditions imposed on Hamas are deemed necessary, it is important to try and press for their fulfilment in a way that does not completely choke off work and dialogue on democratic reform.

Such reform is crucial for longer-term peace prospects. The EU risks playing into the hands of those opposed to democratic reform by putting all the focus on the three conditions. Concerns have arisen over the nepotism and clientelism governing the way in which Hamas distributes its social-welfare benefits; but such "governance" concerns have been eclipsed by the issue of the formal "recognition" of Israel, which is actually far less potent as a day-to-day generator of societal tension (see International Crisis Group, After Mecca: Engaging Hamas, February 2007).

Many voices in the EU have indeed begun to talk of the desirability of renewing the institution-building agenda. There appears to be wider acceptance that the new government should be assessed on what it does, rather than Hamas being backed into a corner to accept select conditions in formal, rhetorical terms. The stock phrase of many European ministers and commissioners has indeed become: "we will judge the government by its actions" (see for example, Benita Ferrero-Waldner's speech at the Hebrew University of Jersusalem, 27 February 2007). It remains to be seen, however, if the more cautious member-states will in practice be willing to move ground.

At the same time, it is important to caution that the unity government should not in itself be seen as a panacea. Indeed, care must be taken that it does not lead to decisions based on deals between political elites, struck behind closed doors in a way that undermines responsiveness to the public. Other conflict situations show that over the long term such elite deals do not augur well for peace, if they make the general public feel excluded and bereft of measures to ensure democratic accountability.

How Europe can help reform

In this sense, it is important to consider carefully the way in which support for democratic reform is renewed. Many statements from ministers and diplomats equate "supporting democracy" with "supporting the president's office". The United States has been more open and extreme in its declared preference for supporting the PA's president, Mahmoud Abbas, with an aim of ousting Hamas. But European governments have themselves drifted towards preferential support for the president's office. Support has continued to go to this office, as an informal exemption from the European boycott; and current plans being drawn up present it as preferred interlocutor. In addition, European governments supported Abbas's call for new elections when this looked dubious from a constitutional point of view.

Support for Abbas might seem instinctively reasonable, but must not be pursued at the expense of a broader reform agenda. The EU must not understand "supporting reform" to mean favouring moderate figures seen as "our allies". The point is to support democratic process, not overtly give preference to those deemed "helpful moderates".

There is even something counterintuitive in the current approach. Until 2006, for a decade EU aid had gone to a small Fatah clique that had wasted these resources and created an increasingly corrupt and opaque set of political institutions. And that was a large part of why Hamas won the elections in 2006. Now the EU appears to be changing its funding patterns deliberately to engineer a continuation of financial flows to that same clique. This risks simply recentralising power and reverses the EU's support for a more parliamentary style of governance in the early 2000s. Fatah needs to be pressed to democratise, not given unconditional and preferential support by external actors (see Muriel Asseburg, EU policies towards the Palestinian government - neither state building nor democratisation, February 2007).

Also in openDemocracy on the international politics of Palestine:

David Mepham, "Hamas and political reform in the middle east"
(1 February 2006)

openDemocracy, "Arab-Israeli settlement: a global call to action"
(4 October 2006)

Khaled Hroub, "Hamas's path to reinvention"
(10 October 2006)

David Govrin, "The Sadat precedent"
(27 November 2006)

Khaled Hroub, "Palestine's argument: Mecca and beyond"
(6 March 2007)

Yossi Alpher, "Riyadh's Arab summit: a precious opportunity"
(28 March 2007)

Ghassan Khatib, "The Arab League summit: two challenges"
(28 March 2007)

Such shortcomings have been concentrated in the EU's two missions in the occupied territories. The Gaza police mission - the EU Police Mission for the Palestinian Territories (Eupol-Copps), is widely praised as being more focused on strengthening civilian democratic control and on creating a single police force - while the US has authorised military support for the presidential guard. To a large extent this is the case. But Copps's reform elements have, in practice, themselves been limited. Most funding has gone to providing anti-riot equipment and other material. Most Palestinians see Copps as a programme helping to quash Hamas rather than supporting a security sector reform that would give the latter a stake in security provision. And in practice several EU donors have also increasingly focused on bolstering the presidential guard under seemingly anodyne programmes of "capacity-building".

Again, this represents a 180-degree turnaround from 2003-04 when the EU had started focusing on bringing security forces under the control of the prime minister's office. This makes the European approach to security reform look as if it is governed by short term expediency rather than a well thought out approach to enhancing democratic accountability over security forces. Moreover, both Copps and the EU's second operation - the Rafah Border Assistance Mission (Eubam) - have been rendered inoperable during the last year. In both cases, the lesson is that self-standing security missions are left vulnerable if they are not backed up at the political level or linked in with the carrots and sticks of overarching EU frameworks (for more details on the two European missions, see CITpax, EU Civil Missions in the Palestinian Territories: Frustrated Reform and Suspended Security, Middle East Special Report No. 1, Summer 2006).

The examples of other conflicts suggest that outside powers get into problems precisely when it is perceived that their talk of supporting democracy reduces to "supporting our kind of democrats". The more one-sided the EU is in this respect the more it will drive Hamas into the arms of Iran. Problems have arisen precisely because Hamas feels excluded from having a genuine stake in governing despite having won the elections; the EU must take care not simply to compound this imbalance. If it releases funds to support state-building just through those ministries under Fatah control, this will produce a lop-sided model of democracy assistance and once again send the wrong signals to both Fatah and Hamas.

The levers of influence

The broader challenge still facing the EU, beyond these immediate decisions over funding, is the familiar one of trying to leverage its on-the-ground, "low-politics" presence for greater influence over the high diplomacy of the peace process.

Under the rubric of the Euro-Mediterranean Partnership (EMP) the EU initially funded a raft of cross-border projects and supported cooperation between Palestinians and Israeli civil society organisations, especially on human-rights monitoring. But most such initiatives had in de facto terms ceased functioning well before Hamas won the 2006 elections. Again, while most attention over the last year has centred on the decision not to deal with Hamas, in some senses at a deeper level the EU's approach was already faltering.

Far from the EMP having fostered better links at a social, economic and cultural level, it has either stood passively aside while these connections have deteriorated or even been drawn in as a source of new tension. Now, of course, day to day links are increasingly hampered by curfews, a labyrinth of checkpoints, the barrier, the de-linking of the two economies and the separate road systems set up by Israel. All these measures are profoundly inimical to the principles underlying the EMP (see Fred Halliday, "The ‘Barcelona process': ten years on", 11 November 2005).

Debate has been focused during the last year on the Hamas boycott; but, arguably more disappointing, at a deeper level is the fact that Palestinian trade with the EU has not taken off; the EU's association agreement with the PA has not helped move the Palestinian economy away from its vulnerable dependence on the Israeli economy; and the association agreement has not gained traction as a trade-facilitating instrument.

Much of this relates to the failure to garner the EU's economic clout, and its presence through the instruments of the EMP, successfully to ensure that Israel abide by the Agreement on Movement and Access (for more details on this, see House of Commons international development committee, Development Assistance and the Occupied Palestinian Territories, January 2007). This has essentially negated any positive impact of the various trilateral forums set up by the EU to foster transport, trade and infrastructure links between Israel, the occupied territories and the EU. These are the areas where the EU could make a renewed effort, and give substance to its now familiar, but essentially hollow, assertions that it seeks to use its economic tools and presence to boost its political role in the peace process.

This situation demonstrates the need for a more political engagement. It is not that the EMP in itself was badly designed. Indeed, it is still at these low-politics levels where the EU operates best. But these can be effective only as part of a greater political drive directed at final settlement negotiations. True, the EU cannot achieve significant advances on its own at the political level. But it could at least begin to put forward ideas - as it did with the roadmap- of how to retain the valuable aspects of the roadmap but complement the latter's sequential approach with a broaching of final settlement issues.

In sum, the EU needs to use the potential of this new juncture both to return to the previously strong aspects of its presence in the occupied territories; and to harness its new instruments to correct the long-standing weaknesses of its low-politics strategies.