The offer sounded promising: Put down your arms, and in return we offer financial support for reconstruction as a way to show the Palestinians that an end of the armed conflict would lead to economic benefits, too. "Peace through prosperity" - is how Middle East expert Margret Johannsen refers to the underlying concept of European help to Palestine - a concept that emerged initially at the beginning of the 1990s.

In 1993 then Israeli Prime Minister Yitzhak Rabin and Palestinian leader Yasser Arafat signed the Oslo peace treaty - designed to lay the foundation for a Palestinian state. Today, Rabin and Arafat are dead and the concept of a Palestinian state has again become a distant prospect. Besides, little of that "peace dividend" has reached the population - despite billions of EU aid.

Economic aid not sustainable

"The peace process led to an economic decline in the Palestinian territory," said Johannsen, senior research fellow at the Institute for Peace Research and Security Policy at the University of Hamburg. Business relations with Israel didn't improve, in fact: they got worse.

The situation is particularly difficult inside the Gaza strip, an area that has been cut off by Israel. Here, Hamas is politically in charge; most goods have to be imported from Egypt via a network of underground tunnels. Exports are even more difficult and a working industrial sector practically non-existent. As a result, unemployment is high and rising.

On the other side, the Fatah-ruled West Bank has experienced some industrial growth over the past years, "but that isn't sustainable growth," said Johannsen. "The money comes from outside. Without it, the West Bank, too, wouldn't be in a position to offer its citizens any economic perspective." According to Johannsen, traffic of both goods and people is being blocked by the large number of Israeli checkpoints. "Who," she said "is going to invest in such an area, where no-one knows in which direction it's going to develop?"

Her opinion is backed up by Tsafrir Cohen, Middle East consultant with Medico International. "The Palestinian national authorities haven't collapsed - so in that sense, the aid has been successful. But it's questionable, how much it facilitated peace, if one looks at how much money has been poured in and where we are today."

Working together with Hamas

Despite that, though, EU help has had positive effects, too, according to Johannsen. European support helped facilitate elections, the construction of water treatment plants and building up the police forces in the West Bank - all "sensible things," said Johannsen.

Both Johannsen and Cohen say that the core problem is the EU's insufficient support for the actual foundation of a Palestinian state. "From the side of the EU, I can't make out any initiative there," said Johannsen. And for Cohen "the EU is neither willing nor able to put an end to the Israeli occupation."

The main target of EU politics, according to Johannsen, is the isolation of Hamas: "This is a form of phobia which keeps Europeans from following a more pragmatic and future-oriented form of politics. I believe this is a mistake."

For Johannsen the separation of the Palestinian areas would be a mistake. "The important thing is to reunite these two parts of Palestine. That's why the EU should work together with Hamas."

The EU suspended its help for the region after Hamas took over control in the Gaza strip. The only organisation it still funds is the United Nations Relief and Works Agency for Palestine refugees (UNRWA).

Compared to the US, the position of the EU with regard to Israelis and Palestinians is one with little influence. And according to Johannsen, the Europeans only have themselves to blame. "The EU has a lot of patience, hoping that what it's doing there will some day blossom and bloom. But I believe that focusing on development, paired with a lack of political involvement does a lot of harm."