Clinton transfers $200 million to Palestinians

By Elise Labott
CNN State Department Producer

WASHINGTON (CNN) - Secretary of State Hillary Clinton on Friday announced the transfer of $200 million in direct aid to the struggling Palestinian Authority to help cover its budget shortfall.

The Obama administration hopes the transfer of funds will improve conditions on the ground and boost its efforts to jump-start stalled Israeli-Palestinian peace talks.

"It is our hope that this support will further conditions in which a Palestinian state can be realized," Clinton said, adding the Palestinian Authority has "proven a reliable partner for peace."

The aid is not new money, but part of $900 million in U.S. aid Clinton pledged in March at a Palestinian donors conference in the Egyptian Red Sea resort of Sharm el-Sheikh.

Clinton made the announcement Friday along with Palestinian Authority Prime Minister Salam Fayyad who, appearing via video conference from the West Bank, said the aid "couldn't have been more timely."

"It will enhance our capacity to deliver vitally needed services to our people in Gaza and the West Bank," Fayyad said.

The Palestinian government of President Mahmoud Abbas has a growing budget deficit, and relies heavily on foreign aid to pay salaries. Fayyad blamed the shortfall on continued Israeli restrictions on the Palestinian economy and the failure of some donors, particularly Arab states, to deliver on their pledges.

Clinton, who praised the Fayyad's efforts at financial transparency and accountability, called on "all nations that wish to see a strong, viable Palestinian state, living in peace and security with its neighbors" to support the Palestinian Authority.

The aid is meant to help the efforts of special envoy George Mitchell, who is in the region this weekend as part of increased U.S. efforts to revive peace talks.

Clinton said Mitchell has made progress in creating a climate for a resumption of negotiations "in the near future."