Oxfam Urges Boycott End

"Europe's foreign ministers should not miss the opportunity of their forthcoming meeting ... to restore the faith of Palestinians in the European Union," Oxfam International Executive Director Jeremy Hobbs said.

The ministers were due to hold their talks on April 23 and 24 in Luxembourg.

"Despite welcoming the national unity government, the European Union has failed to restore aid payments," he added in a statement from the British charity. "With Palestinian institutions collapsing and insecurity growing, the resumption of international aid to the Palestinian Authority is a necessary step to preventing further suffering and securing a just and lasting settlement on the basis of international law."

The EU was the biggest aid donor to the Palestinian government until the Hamas militants came to power in March 2006. The Quartet of Middle East mediators -- the European Union, the United States, the United Nations and Russia -- then suspended direct aid to the Palestinian Authority.

Unethical and ineffective, says Oxfam

Since then, the 27-nation EU has redirected its aid, worth 700 million euros ($943 million) in 2006, through a special mechanism to help the neediest people while bypassing the government to avoid contact with Hamas.

Hobbs said that suspending aid and withholding tax revenue was both unethical and ineffective as a policy tool.

"Parents have been driven into debt, children taken out of classrooms and whole families deprived of access to medicine and healthcare," he added.

Services meltdown

A survey commissioned by Oxfam from the Palestinian Center for Public Opinion (PCPO) found that more than four out of five of 677 families interviewed have seen a drop in their income following the boycott. Half of all the families reported losing more than half their income, a statement from Oxfam said.

"The number of Palestinian people living in poverty has jumped by 30 percent, essential services are facing meltdown, and previously unknown levels of factional violence plague Palestinian streets," the survey said.

Ninety percent of the senior managers running schools, hospitals and water services across the West Bank and Gaza reported that services had been undermined by the boycott.

"The national unity government remains a fragile creation that could collapse without financial support, leading to even greater insecurity," the report said. "The occupied Palestinian territories risk becoming a 'failed state,' destroying the chances of achieving a two-state solution."