A four-story high Palestinian flag flying in front of the European Commission building in Brussels, Monday, Sept. 12, 2011. Photo by AP

BRUSSELS – A senior European Union official said Tuesday that the union may cut off financial assistance to the Palestinian Authority, if the American-brokered peace talks between Israel and the Palestinians were to fail.

In that event, the PA would cease to function and responsibility for the West Bank would revert to Israel, the source said.

EU officials raised questions about continuing assistance to the PA a few months ago, in view of the lack of progress in the talks, the official said, in a briefing to Israeli journalists in Brussels. The assistance was intended to help the Palestinian Authority prepare itself for statehood, not to perpetuate the existing situation, he said.

“Some people suggested giving the money to other countries, like Syria, Mali and other places around the world,” he said.

He added that the issue may be raised again, if the talks end in failure at the end of the allotted nine month period, “because the question is, what’s the money for if a Palestinian state isn’t established?”

Mohammed Dahlan, former head of the Palestinian Preventive Security Services, held meetings with EU officials in Brussels yesterday. Dahlan, who is seen as a bitter rival of Palestinian President Mahmoud Abbas, said in a talk to journalists that United States Secretary of State John Kerry’s efforts were doomed to fail, because they were driven by emotion rather than political rationale.

Prime Minister Benjamin Netanyahu could reach an agreement but doesn’t want to, Dahlan said, while Abbas is interested in a settlement, but has no legitimacy in the Palestinian street.

Dahlan said he was in favor of stopping the EU assistance to the PA, as the continued funding was keeping two dictatorships alive – one in Gaza and the other in Ramallah. The situation is good only for Israel, which isn’t interested in reaching a settlement, he said.

Dahlan said Kerry wasn’t interested in forcing an arrangement on the parties, and especially on Netanyahu, fearing that such a move would merely toughen Israel’s positions. So Kerry is continuing his attempts to persuade the sides, although neither is capable of reaching an agreement.

Since the Oslo accords were signed, the EU has contributed some 300 million euros to the PA annually. The money is intended for paying wages in the Palestinian public sector, setting up administrative institutions and advancing infrastructure projects.

The EU official said the union knows that if funding were are cut off the PA will collapse. Therefore, the EU is considering a gradual cessation, if and when such a decision is made.

Were that to happen, the PA would cease to function and its security services and organizations would fall apart. Israel would then have to take the responsibility for the West Bank, including the payment to civil servants and public officials, he said.

Meanwhile the EU continues to support Kerry’s efforts to advance the peace process. Andreas Reinicke, the EU representative to the Middle East peace process, said in Brussels on Tuesday that he is still optimistic regarding the talks.

Reinicke said that in a few weeks the EU will start labelling products originating from Israeli settlements in the West Bank, to distinguish them from goods made in Israel proper. He said so far 14 out of the 28 EU member states, including Britain and France, said they would label goods from West Bank settlements.

He reiterated the EU’s ongoing objection to the construction in the settlements. “You can’t build on land you’re negotiating about,” he said.