In a statement on social media platform X, EU neighbourhood commissioner Olivér Várhelyi announced all payments had been “immediately suspended” while the EU’s €691-million development support for Palestinians was “under review”.

The EU is the biggest donor of aid to Palestinians residing in Hamas-controlled Gaza and the West Bank, governed by President Mahmoud Abbas’ Palestinian Authority. The funds help ensure Palestinians can access health, education and social services.

Austria was the first member state to announce it would cut off €19 million in funds to Palestinians on Monday morning. Germany also confirmed it would “temporarily halt” aid as it carries out a more thorough financial review.

Earlier on Monday, EU spokespersons had failed to confirm whether the bloc would consider suspending development aid, but reiterated its unwavering backing of Israel’s right to defend itself.

“In light of this indiscriminate attack waged by Hamas, Israel has the right to defend itself, its territory and its people in line with international law,” Peter Stano, the European Commission’s spokesperson for foreign affairs and security policy, said on Monday afternoon.

“It is also important, on the other hand, to see that Palestinian people are not suffering because of this,” Stano added.

The statement came as the Israeli foreign minister announced a full siege on the Gaza strip in response to Hamas’ surprise attack on Saturday, blocking all essential supplies including food, water and electricity to the Palestinian enclave.

Stano refrained from confirming whether Israel’s retaliatory airstrikes, which the UN estimates to have forcedly displaced 123,000 Palestinians, were considered by the EU to be a legitimate form of self-defence in accordance with international law.

EU leaders have vehemently condemned Saturday’s large-scale assault on Israel by Hamas, which it considers a terrorist organisation, and called for civilians to be protected and hostages released. The ensuing violence, which has already claimed the lives of at least 1,100 people, is the biggest and deadliest escalation between both sides in decades.

The bloc’s foreign ministers – many of whom are currently in Muscat, Oman, for a joint meeting between the EU and the Gulf Cooperation Council (GCC) – will convene for an extraordinary meeting on Tuesday to discuss the EU response.

EU governments have also been ramping up security around key Jewish sites in fear of an uptick in anti-Semitic attacks as the conflict unfolds.

Israel has right to “self-defence”

The EU has stood firmly behind Israel since Hamas, the Islamist militant group that controls the Gaza strip, caught Israeli authorities off-guard on Saturday with its unprecedented incursion.

Hugh Lovatt, a senior policy fellow at the European Council on Foreign Relations and expert on Israeli-Palestinian relations, told Euronews that the European decision to take sides in the conflict could prove dangerous.

“Europeans should support Israel’s right to self-defence, but should press for a response in line with international law,” Lovatt explained.

“A full ground invasion and disproportionate attacks that target Palestinian civilians will have far-reaching and destabilizing consequences for Israelis and Palestinians alike, including by increasing wider support for Palestinian armed resistance and increasing the risk that Hezbollah enters the conflict,” he added.

“Giving Israel a blank check, as Europeans may now be doing, risks a dangerous and counter-productive outcome,” Lovatt said.

On Monday, Iran denied reports it had helped Hamas plan the assault on Israel along with the Tehran-baked Shiite militant group Hezbollah. When asked about Tehran’s possible involvement, EU spokesperson Peter Stano refrained from “pointing fingers”, but confirmed European foreign ministers would address possible geopolitical motives during their Tuesday meeting.

Lovatt also believes Europe needs to work closely with other Arab states that can mediate the conflict. “Europeans should work with those who have some influence over Hamas, most particularly Egypt and Qatar, to similarly warn against its deliberate targeting and detention of Israeli civilians – which is also at odds with Islamic law,” he said.

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The EU is in dialogue with such partners and will ask them to “do everything they can to exercise their influence over this group (Hamas) to stop what they are doing”, Stano said on Monday.

In early September, the EU launched a new initiative to revive Israeli-Palestinian peace talks in cooperation with Saudi Arabia, Egypt and Jordan. The efforts focused on achieving the so-called two-state solution, broadly backed by Western governments but hailed by some experts as a moribund solution to the conflict.

The EU’s top diplomat is set to meet Gulf state ministers in Muscat on Monday, who could play a key role in a possible mediation. Recent US-backed talks on the normalisation of relations between Israel and Saudi Arabia, in exchange for a US-Saudi defence deal, had raised hopes of a de-escalation. 

EU halts Palestinian aid

The EU’s decision to suspend funds came after Austria and Germany confirmed similar steps.

Speaking on Austrian radio on Monday, the country’s foreign minister Alexander Schallenberg chose not to distinguish between Hamas-ruled Gaza and the West Bank, which is largely governed by President Mahmoud Abbas’ Palestinian Authority, considered a rival to Hamas.

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Lovatt warned against counter-productive measures such as cutting aid to the Palestinian Authority and other forms of financial support to Palestinians.

“Europeans need to recognise the Palestinian Authority remains completely peripheral to ongoing events. Pushing Abbas to clamp down on Hamas and other groups such as Islamic Jihad will backfire,” he said.

The EU’s financial aid to the Palestinian people residing in the West Bank and the Gaza strip amounted to €296 million in 2022, and included support for social allowances, medical referrals, salaries and pensions. The support also aimed to mitigate the impact of Russia’s invasion of Ukraine on food supply.

The EU funds destined to Gaza were channelled through the United Nations Relief and Works Agency for Palestine Refugees (UNRWA).

Asked whether the EU was assessing whether EU funds destined to Gaza could have inadvertently fallen into the hands of Hamas militia, Ana Pisonero, the European Commission’s spokesperson for enlargement and neighbourhood policy, said on Monday the EU budget did not provide “direct or indirect” funding to Hamas.

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“The EU does not fund Hamas or any terrorist organisation activities, either directly or indirectly. The EU has very strict rules in place to screen and vet the beneficiaries of EU funds,” Pisonero said.

“All recipients of EU funding are required to ensure that these funds are not made available, either directly or indirectly, to entities, individuals or groups which have been designed under EU restrictive measures or to their representatives.”

The Commission has not had any contact with Hamas since 2007, when the terrorist organisation took over the Gaza Strip as a result of its military confrontation with Fatah.