GERMANY NONCOMMITTAL ON PA BUDGET SUPPORT

C O N F I D E N T I A L BERLIN 001525

SIPDIS

DEPARTMENT PLEASE PASS TO NEA/IPA ANDREW LENTZ

E.O. 12958: DECL: 12/02/2019
TAGS: OPDC PREL EAID PGOV WBG EU IS GM
SUBJECT: GERMANY NONCOMMITTAL ON PA BUDGET SUPPORT

REF: STATE 120487

Classified By: Minister Counselor for Political Affairs George Glass fo
r reasons 1.4 (b,d).


1. (C) Pol Minister Counselor delivered reftel letter from
Secretary Clinton to German Foreign Minister Westerwelle
November 25 to MFA Near East Assistant Secretary-equivalent
Andreas Michaelis who had just returned from his November
23-24 visit to Jerusalem and Ramallah with Westerwelle.
Michaelis said that the MFA would be looking at this request
carefully but that he did not want to convey any illusions
that a decision on budget support could be made quickly. He
said that he did not foresee a solution to this question for
about two months. In this context, he noted that Palestinian
Authority (PA) Prime Minister Fayyad had not mentioned this
as an issue to Westerwelle during their November 24 meeting
in Ramallah. He said that Westerwelle wishes to discuss this
issue with his Norwegian counterpart in an upcoming meeting.


2. (C) Michaelis said that it may be possible that for 2010
Germany could convert into direct budget support the 25
million euro for fuel that it provides through the EU PEGASE
mechanism. He noted that the MFA and the Ministry of
Economic Cooperation and Development (BMZ) are engaged in
discussions on how better to coordinate. He noted that the
German government does not favor providing direct budget
support as a channel of assistance. He said that PA PM
Fayyad practices good accounting techniques which could allay
some of the German government's concerns. Michaelis also
explained some of the current bilateral assistance for
projects that Germany currently provides, including for
wastewater management and a sewage plant in Gaza. Germany
will be concentrating its future assistance on such technical
projects, he said, including for the security sector and
state institution building. Support will also include
continuation of former FM Steinmeier's program to fund
smaller projects more quickly, such as schools and
playgrounds.


3. (SBU) Econoff also provided a copy of reftel letter and
conveyed reftel points to Andreas Gies, Head of Division,
Regional Development Policy/Middle East, Ministry of Economic
Cooperation and Development (BMZ). Gies echoed what
Michaelis said about the 25 million provided through PEGASE.
He argued that Germany effectively already gives budgetary
support to the PA through this mechanism to cover recurring
energy expenses. These 25 million euros, he said, "are the
same as budgetary support" as they free up funds the PA would
otherwise have to devote to these expenses. Gies said he
expected Foreign Minister Westerwelle would send a formal
response to Secretary Clinton in the coming days.


4. (SBU) Comment: Post is aware that Michaelis is seeking a
meeting with S/E Mitchell during his current visit to
Washington and we understand that the German Embassy may have
already made such a request. Such a meeting would be a good
opportunity to stress the USG message.
MURPHY