WRITTEN QUESTION E-1554/02 by Bob van den Bos (ELDR) to the Commission. EU aid to the Palestinians.
Date: 2002-06-03
Institutions: European Parliament, Provisional data
Subjects: EU aid, EU financing, International Monetary Fund, Palestine question, financial control, terrorism, use of aid

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(2003/C 92 E/064)

WRITTEN QUESTION E-1527/02

by Salvador Garriga Polledo (PPE-DE) to the Commission

Subject: French ban on paying interest into current accounts

(3 June 2002)

The French Banking Commission has banned Caixa Bank, the French branch of the Spanish bank La Caixa,
from providing current account holders with 2 % interest, something which the French banking system
does not offer.

At the request of the French government, the Banking Commission, part of the Bank of France, took the
decision to examine Caixa Bank payments. Its conclusion was to ban the Spanish bank from opening any
new accounts of this type. Moreover, Caixa Bank has been given two months to close accounts opened
prior to the ruling.

With regard to the decision adopted by the French Banking Commission, at the behest of the French
government, to ban Caixa Bank from paying interest into its current accounts, which has been justified by
the bank’s representatives on the basis of the dictates of the euro and the necessity to standardise European
monetary regulations: does the Commission consider this decision to be in accordance with the relevant
Community provisions?

Answer given by Mr Bolkestein on behalf of the Commission

(28 June 2002)

The Commission is aware of the decision by the French Banking Commission to which the Honourable
Member refers. An application for suspension and annulment of that decision has been received by the
Council of State, which has, among other things, to examine its Community law aspects with a view to
referring it, where appropriate, to the Court of Justice for a preliminary ruling.

For its part, the Commission is in the process of examining the points of law arising from the French
legislation on which the decision of the Banking Commission is based. It will certainly take the necessary
measures once all the factual and legal circumstances determining those measures have been clarified and
assessed under the appropriate procedures laid down in the Treaty. It will be sure to keep the Honourable
Member informed of developments.

(2003/C 92 E/065)

WRITTEN QUESTION E-1554/02

by Bob van den Bos (ELDR) to the Commission

(3 June 2002)

Subject: EU aid to the Palestinians

According to the Israeli Government, the Palestinian Authority has misused EU aid funds to finance
terrorism. The Dutch newspaper NRC Handelsblad even reported on 8 May 2002 that the European Union
was aware of the Palestinian Authority’s misuse of funding but had refrained from raising the issue in the
interests of a resumption of the peace process.

In his letter of 7 May 2002 to the Ministers for Foreign Affairs of the European Union, Commissioner
Patten rejected these accusations. However, the information about the nature of the EU’s aid to the
Palestinians which he attached to his letter by way of evidence does not make it clear exactly what the
budget support is being spent on or how its use is monitored.

Will the Commission draw up a more specific account of the distribution of the EU funding among the
various expenditure headings of the Palestinian Authority and indicate how the IMF monitors expenditure?

Why did the Commission seek the assistance of the IMF in monitoring the use of European aid funds a
year ago? What was the situation before the IMF started to provide such assistance?

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What will the Commission do to prevent funding being misused by the Palestinian Authority for purposes
of terrorism and corruption?

If the misuse of funds for purposes of terrorism and corruption has been proven, is the Commission
considering measures? If so, what?

In what respect will the reforms which have been initiated within the Palestinian Authority also include
reform of financial management and supervision thereof? Will the Commission urge the Palestinian
Authority to ensure that they do?

Answer given by Mr Patten on behalf of the Commission

(2 August 2002)

The Community’s intervention consists of direct budgetary support, equivalent to about 10 % of total
expenditure. The Community support is merged with the support of other donors, converted into shekkels
and used by the Palestinian Authority (PA) to finance its austerity budget (mainly salaries for the public
sector and emergency expenditure).

The Fund secures a continuous presence at PA’s Ministry of Finance through its Resident Representative
who certifies, on a monthly basis, that all revenues and payments are channelled through the Ministry of
Finance’s Single Treasury Account
the Resident
representative of the International Monetary Fund (IMF) is permanently following the unfolding of the
expenditures pattern during each month and is able to report on expenditure outturn approximately six
weeks after the close of any month. In effect he sees all spending information, received by the Minister of
Finance in aggregate form including the payroll expenditure (which constitutes approximately two thirds
of the total expenditure of the PA). Furthermore the IMF also regularly mounts major missions to the PA
from its Washington based staff.

to expenditures in particular,

(STA). With respect

It

that

Intifada,

is recalled, however,

following the outbreak of

Cooperation between the Commission and the IMF dates back to 1997 when it was agreed to establish a
loan fund for the Palestinian Authority in response to the temporary freezing by Israel of clearance
the situation deteriorated
revenues.
considerably with Israel freezing indefinitely all monthly transfers of tax revenues to the PA. These
transfers, making up more than 60 % of its own revenue, threatens economically the very existence of the
PA. To avoid the collapse of the Palestinian Territories into chaos and anarchy, which would deprive the
population from the delivery of basic services and reinforce fanatic and violent groups, the Community
decided to provide direct budgetary assistance to the PA (May 2001). Throughout the establishment of this
budgetary package, the Community continued to work closely with the IMF which had agreed to provide a
monitoring role. Thus the IMF has been involved since the start of the budgetary assistance package to the
PA. The Community assistance of EUR 10 million (namely USD 9 million)
is, on a monthly basis,
(USD 30 million). The Community budgetary
equivalent
assistance is provided to stabilise the PA and allow it pay the salaries of the public sector and provide basic
services to its population (more than half of the Palestinian population lives under conditions of poverty
with a revenue of less than USD 2 per day). Furthermore, the Community’s budgetary assistance is
provided on the basis of a conditionality aiming at strengthening the consolidation and transparency of the
PA’s public finances and promoting reform in the PA. The evaluation of the compliance with the
conditionality attached to Community’s budgetary assistance is carried out on the basis of monthly
comfort letters provided by the IMF. The rigour and objectivity of the IMF are well known. The Fund is the
world authority in macroeconomic analysis and particularly in fiscal developments. Its monthly reporting
to the Community has given it the possibility to monitor fiscal developments in the PA on a regular basis.

transfers from Israel

to only 1/3 of

fiscal

Deepening the reform in the PA and improving its financial management capacities is the best preventive
strategy against the misuse of funds and corruption in the PA. The Community’s budgetary assistance is
provided on the basis of a conditionality aiming at strengthening consolidation and transparency in the
PA’s public finances and promoting reform in the PA. This conditionality has already brought fruits: the
IMF certifies every month that all revenue and expenditure of the PA is channelled through the Treasury’s
Single Account. Another key condition of the budgetary support has been the recently approved Judiciary
Independence Law which constitutes an important step towards the reform of the Judiciary in the
Palestinian Territories and the separation of powers. The Community’s conditionality also provides for the
strengthening of the General Control Institute (Court of Auditors).

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The Commission examined the allegations that have been made by the Israeli authorities on the misuse of
Community funds. It has looked carefully at the evidence provided by the Israeli government (Minister
Naveh) and by the Israeli Defence Forces. The Commission also invited the IMF and the Palestinian
Authority to comment on the allegations. The Commission, on the basis of the material it has examined,
has not found any evidence of Community funds being used for purposes other than those agreed between
the Community and the PA. The Commission takes this matter extremely seriously and will continue to
give utmost priority to the examination of any allegations of misuse of Community funds.

The reform of the financial management of the PA is the objective of several key conditions of the
conditionality attached to the Community budgetary assistance. For instance, conditions aim, inter alia, at
the implementation of the austerity budget of the PA, which has been prepared with the help of the IMF.
They also aim at the control of the payroll and the containment of budgetary arrears. Monitoring of these
conditions is provided in the IMF’s monthly comfort letters, on the basis of which the Commission
evaluates compliance and approves the payments.

(2003/C 92 E/066)

WRITTEN QUESTION P-1567/02

by Christa Randzio-Plath (PSE) to the Commission

(28 May 2002)

Subject: Competition/auditing

As a result of the Enron scandal, the problem of financial stability in relation to the role and position of
audit companies in the US and Europe, too, has become a focal point of public interest.

Over the last few years, the number of large audit companies has continued to decline, thus very much
restricting the ability of large, internationally operating firms to choose or change their auditors.

This is not only an important regulatory and supervisory issue; the fact that there are few actors in the
auditing business (cid:1) only four firms in the US (cid:1) gives cause for concern in terms of competition, too, in
particular since, as the case in point of Enron illustrates, financial market stability can also be affected.

In the European Union, over 80 % of the 100 largest firms in Belgium, France, Italy, the United Kingdom
and the Netherlands make use of only four audit companies; in other countries, that figure is well over
50 %. Though there are large firms operating at national level, they are not in a position to withstand
competition.

Are these not then developments which give cause for concern in competition terms? What is the
Commission’s assessment of competition within auditing in the European Union, given that there are very
few firms competing with each other nationally, does the Commission think that action needs to be taken,
and what measures does it propose in connection with Articles 81 and 82 of the EC Treaty?

Answer given by Mr Monti on behalf of the Commission

(26 June 2002)

The issue of competition in the auditing industry is being closely followed by the Commission both at the
level of structural changes in the number of market players (through the application of the Merger
Regulation, Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations
between undertakings (1)) and at the level of the market players’ behaviour (through the application of
In its 1998 decision in case No IV/M.1016 PriceWaterhouse/
Articles 81 and 82 of the EC Treaty).
Coopers & Lybrand,
the audit and
the competitive conditions of
accounting markets. Notably, it found that these markets enjoyed a high level of concentration and may be
prone to issues of collective dominance. It however concluded that there were still enough players active in
the markets (five) to ensure sufficient competition.

the Commission analysed in detail