JERUSALEM — Plans by Middle East mediators to avert a Palestinian financial collapse will likely take weeks to finalise and fall far short of what is needed to overcome an economic crisis.Western diplomats said US objections to including salary payments as part of the new aid programme could make it impossible to reverse a steep drop in living standards even if supplies of food and medicine increase sharply.

The Quartet of the United States, European Union, Russia and United Nations raised Palestinian hopes this week with a promise to funnel aid to Gaza and the West Bank, while bypassing the Hamas-led government.

“There are major obstacles,” said one of the diplomats working on the mechanism. He added that he did not expect the new Quartet programme to be up and running before the end of June. A US official said the Quartet members would meet in Brussels in two weeks’ time to discuss progress.

An internal EU memo said that with “even substantially increased levels of funding, the EU will not be able to stave off a crisis but might be able to avert or delay a collapse.”

As currently envisaged, a European-backed plan to set up a trust fund for aid would, at most, pay salaries to health and education workers, only a quarter of the Palestinian Authority’s 165,000 workforce.

But diplomats said opposition from Washington and the reluctance of banks to breach a US-led financial blockade could prevent the payment of any salaries — the driving force of the aid-dependent Palestinian economy.

The Palestinian economic crisis has intensified since aid was cut in March in order to try and push the Hamas Islamist government to recognise Israel’s right to exist, renounce violence and accept past peace accords. Hamas has refused.

“God willing, our money will come next week,” said Raed Fatath, a 48-year-old school teacher in the West Bank, hopeful the Quartet’s agreement would mean swift relief.

But a senior European diplomat said people had the “wrong perception”.

Under the proposed mechanism being crafted by the EU, a trust fund would direct aid to key sectors through the office of Palestinian President Mahmoud Abbas, seen as a moderate who wants peace talks with Israel.

But the plan to pay only some salaries has also drawn warnings that it could intensify simmering internal strife if security forces still have to go without wages. An internal European Commission memo said it could spark new tensions.

“Instead of solving the problem, it’s going to create new problems,” said a senior Palestinian official.

World Bank staff said in a memo it only made sense to proceed with any salary payments if it was clear that pay for security services would be covered from elsewhere.

“It’s a band-aid on a gunshot wound,” said International Crisis Group analyst Mouin Rabbani of the Quartet proposal. “You now have tens of thousands of people under arms who are not being paid. The potential for real problems is really there.”

U.S. officials recently told Abbas that Washington opposed paying any salaries, even through the president’s office.

“We’re very interested in providing direct humanitarian assistance,” said US Embassy spokesman Stewart Tuttle. “But we don’t want the international community to be seen as taking over the responsibilities of the Palestinian government.”

While the EU could try to proceed without the United States, which one EU source yesterday described as “dragging its feet” on the issue, doing so could prove difficult.

The World Bank said in a recent memo that a prerequisite for operating the fund would be for the United States and Israel to provide “explicit assurances” to any agency, company or bank involved in the programme that they will not face sanctions.

“Any party that managed such a facility would run appreciable political risks; these need to be adequately addressed in advance, with appropriate assurances provided by all parties,” the May 7 memo read.

David Makovsky of the Washington Institute for Near East Policy said the Quartet’s proposal reflected a “tactical adjustment” in US. thinking to avert a humanitarian crisis.

But he added: “A Hamas government that is sworn to destroy its neighbour has no claim or entitlement upon international funds and the US will not back paying regular salaries and have business as usual.” — Reuters