JERUSALEM, Feb. 27 — After receiving a dire warning that the Palestinian Authority was so short of money that it might collapse in two weeks, the European Union on Monday offered $144 million in aid to the Palestinians before a Hamas government takes power.
The Europeans acted in partial response to a letter from James D. Wolfensohn, the special Middle East envoy of the so-called Quartet made up of the United States, the European Union, Russia and the United Nations.
Mr. Wolfensohn warned in a letter dated Saturday that "unless a solution is found, we may be facing the financial collapse of the P.A. within two weeks," referring to the Palestinian Authority. The money from the European Union will not solve the Palestinian money crunch for very long, especially since most of it is not in cash, but it will ease the burden of repayments to suppliers.
A large Israeli oil company, Dor Alon, said Monday that it could no longer supply fuel oil and natural gas to the Palestinians because a check for some $35 million from the Palestinian Authority bounced last week. The European money will presumably ensure the flow of energy to the Palestinians in a chilly, wet winter.
The acting Palestinian finance minister, Jihad al-Wazir, said there was an immediate need for "$60-80 million next week to begin to pay wages," Mr. Wolfensohn wrote in the letter to Quartet foreign ministers, warning of "wide-ranging consequences" for "security and stability for both the Palestininians and the Israelis."
The Palestinian Authority's financial situation has worsened, said Mr. Wolfensohn, the former president of the World Bank. With estimated internal tax revenues of $35 million a month, and the loss of Israeli-collected tax and customs receipts of some $50 million a month, the Authority faces a monthly deficit of $130 million a month.
For February and March, the period before a Hamas government is likely to take over, Mr. Wolfensohn said, the Authority may need as much as $360 million in new money. He said the Authority had to make loan repayments, pay arrears to private suppliers of energy and other goods, and meet the Bush administration's demand that it return $50 million provided last year for infrastructure improvements and used as collateral for bank loans.
Israeli public companies supply electricity and water to the Palestinians, deducting the cost from the customs and tax revenues the Israelis collect for the Palestinian Authority. Israel is now withholding the revenues because of the victory of Hamas in the legislative elections last month.
Israel argues that the recent swearing in of the legislature means that Hamas now controls the Authority, but the United States and the rest of the Quartet insist that President Mahmoud Abbas is still running a caretaker government that must be supported, and that any cutoff of financing should not take place until Hamas forms a government.
Mr. Wolfensohn has been asked to help the Authority get through February and March. Matters will only get worse once Hamas is considered to have formed a government by the Quartet and more funds are cut off. But the Quartet is arguing about when that date will be, with the European Union and the United Nations now saying it is important to wait to see what the new government's program is before cutting aid.
Benita Ferrero-Waldner, the European Union's external relations commissioner, emphasized on Monday that European aid was not going to Hamas. After a Hamas-led government is sworn in, she said, "we have to see what will be the program of the government."
"We have to give them time," she said.
In the interim, she said, the Europeans, like the Americans, are "supporting the caretaker government and trying to do everything to give Mahmoud Abbas our full support."
Of the $144 million the Europeans pledged on Monday, about $47.4 million will pay energy bills that the Palestinians owe Israeli companies, $75.9 million will be channeled through the United Nations Relief and Works Agency for Palestinian refugees and $20.7 million is cash — direct budget support to help pay salaries.
The Quartet and Israel agree that relief aid to the Palestinians should continue, including money spent by United Nations organizations. The amount of money channeled through such organizations is likely to increase, but that will not pay the 135,000 or so Palestinians dependent on salaries from the Palestinian Authority.
Mr. Wolfensohn, diplomats say, is arguing that he should try to get the Palestinian Authority through to June, when the Group of 8 industrial nations are to meet. But the United States and Israel fear that such a long period would allow Hamas to establish itself.
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