Writing cheques for Gaza is easy. Politics is the tricky bit

This article was published in the The Guardian on 27 January 2009.

Shortly after I became a European commissioner in 1999 I visited Gaza and the West Bank to see how the European commission, under strong international pressure, could speed up disbursement of development assistance. I recall in particular visits to Gaza airport, subsequently ploughed up by the Israeli army, and to a general hospital. I visited the morgue that was under construction. It must have been badly overloaded in recent years.

After the second intifada began in the autumn of 2000, Israel stopped the transfer of tax receipts owed to the Palestinian Authority. In the following summer the commission began payment of direct budgetary assistance to the authority. There were tough conditions, overseen by international financial institutions. The infrastructure built by European money on the West Bank and in Gaza was systematically trashed by the Israeli Defence Forces in 2002. They were responding to horrific suicide bombings in Israel. Anything that might be seen to provide the sinews of government was destroyed - including the land registry, courts and police stations. This did not obviously advance the prospect of a two-state solution.

Throughout the period when budgetary support was provided, the European commission was accused by some Israeli lobby groups of bankrolling terrorism and corruption. We just about achieved our aim and managed to keep the Palestinian Authority afloat - even to reform it. As the responsible commissioner, I was privately encouraged by senior US state department officials to continue the support, and was never asked by Israeli officials to stop it. Europe was in effect fulfilling its now historic role of financing the terrible failure of policies laid down not in Brussels, but in Tel Aviv and Washington. Doubtless Europe is getting ready to do the same again.

From 2000 to 2008, European commission funding to Palestine totalled nearly €3bn. In the last couple of years, about half the funding went to Gaza, for example in fuel for the power plant and help for impoverished families. Over the last 10 years about €50m has been spent in Gaza on physical infrastructure work, part of a much larger sum committed but not spent. To all these figures should be added the development assistance paid for directly by member states.

After the recent assault on Gaza, the collecting tin is once again being passed round. Leaving to one side the controversy over the BBC's lamentable failure to air the Disasters Emergency Committee appeal, on a state and European level we should be generous in giving humanitarian relief. But it is worth questioning the point of further development assistance in the absence of political progress. With no political movement, and with a ban on any contact at all with Hamas, Tony Blair's purported role as Palestine's George Marshall - bringing peace through development - has been totally irrelevant. Forgive the question, but isn't this the same Tony Blair who rightly used to talk to Gerry Adams and Martin McGuinness in the pursuit of peace; the same Tony Blair who released terrorist murderers from prison in the same cause? If Europe is to write more cheques, surely we should insist on some political movement.

The first step would be to respond positively to the call from Mahmoud Abbas, the Palestinian Authority president, for the formation of a unity government. There was one after Hamas won a majority of seats in the 2006 parliamentary elections. After active diplomatic efforts by Saudi Arabia, Hamas and Fatah were locked into an uneasy truce which was split asunder in part by the US and European refusal to deal with Hamas. Presumably any unity government formed today would require another Fatah-Hamas deal, brokered by Arab governments. But would the world then deal with the government that emerged? Without Hamas, how would any peace deal be sold to the Palestinians? The diplomatic trick is not how to justify the isolation of Hamas but how to ease them out of their isolation, to get them to endorse a permanent ceasefire, and to release captive Corporal Shalit.

Progress also requires recognition of the way that all the dots join up in the Middle East. Iran, Syria, Lebanon and Hezbollah will all be part of any hopeful way forward. Washington needs to talk to Iran and to engage Syria. It should also encourage the diplomacy of Turkey and Qatar, which have become increasingly helpful in recent months.

So much of the focus in the Middle East is on process. We should go back and look at the content of a deal to produce lasting peace and security for Israel and a viable Palestinian state. There will be no resolution while there are so many Israeli settlements on the West Bank. Will the Obama administration say that loud and clear to Israeli politicians?

Before Europe does the easy bit - even in these financially straitened times - and writes more cheques, we should at least ask ourselves what exactly we are buying with our money. It would be a real breakthrough if the answer was peace.