Donor Talks to Center on Settlements

PARIS -- Dozens of countries met on Monday to pledge billions of dollars in aid to the Palestinians in support of Western-backed President Mahmoud Abbas, but disputes with Israel on settlements and checkpoints darkened the mood.

French President Nicolas Sarkozy urged the 68 visiting states to be generous at the one-day conference, the financial sequel to last month's Annapolis meeting, which started the first Israeli-Palestinian peace talks in seven years.

The Palestinian government is seeking $5.6 billion over three years at the aid meeting -- funds designed to revive the moribund Palestinian economy and strengthen Abbas in a power struggle with Hamas as he negotiates with Israel.

"Without the continuation of this aid and without the liquidity needed for the Palestinian budget, we will have a catastrophe in the Gaza Strip and in the West Bank," Abbas told the conference.

U.S. Secretary of State Condoleezza Rice echoed his plea, saying, "This conference is literally the government's last hope to avoid bankruptcy."

Abbas' challenges go well beyond finances. Hamas, which opposes the peace talks, seized control of the Gaza Strip in June, and Israel antagonized Palestinians by announcing plans to expand a settlement near Jerusalem by around 300 homes.

"If we want to launch serious talks to end the conflict, as we and the world have decided to do, then how can a key party pursue settlement activity and expansion?" he said.

Israeli Foreign Minister Tzipi Livni did not directly address his question, but she reiterated Israel's intent to live up to the 2003 U.S.-backed "road map" peace plan, which demands that it freeze settlement activity.

"Despite the difficulties, we are ready to do so and are committed to meet our road map obligations, including in relation to settlement activity," Livni said.

Several states and the World Bank told Israel that it needed to scrap checkpoints that crisscross the occupied West Bank if it wanted the aid to make a big difference for Palestinians.

Livni struck a conciliatory tone in her speech but stuck to her guns on checkpoints, which Israel has refused to lift, citing security concerns. It has also tightened its military and economic cordon around Gaza.

"We have no desire to control Palestinian life. We do not want the image of Israel in the Palestinian mind to be a soldier at a checkpoint, but we know that making every effort to improve the quality of life also means making every effort to end the threat to life caused by terror and violence," she said.

"Each day we must examine how best to advance peace and security, and at the end it comes down to the details, checkpoint by checkpoint, step by step for a better future," Livni added.

The European Union executive offered $640 million of grant aid for the Palestinians. The United States pledged $555 million, and Sarkozy said France would give $300 million.

Abbas and Israeli Prime Minister Ehud Olmert agreed at the Nov. 27 Annapolis talks to try to reach a deal on a Palestinian state by the end of 2008. Those talks formally resumed on Dec. 12 but have been complicated by the new settlement announcement.

Many analysts doubt that the peace effort will go far because of divisions among the Palestinians and Olmert's weak position with a fragile governing coalition, part of which opposes the compromises necessary for a peace deal.