When starting my final BA research, I knew I wanted to study development policies. I was quickly drawn to research the EU's aid and development policy in relation to the Palestinian people, which, according to the EU, is aimed at promoting peace in the region as part of the two-state solution. In reality, the policy's outcomes have been effective in the short-term at best, as they contribute to Palestinians welfare, though irrelevant, ineffective and unsustainable for the long-term aim of building a self-sufficient Palestinian state, and creating the necessary conditions for peace. My research findings led me to believe that development assistance should be a complementary strategy when trying to consolidate peace, rather than the main policy. Development assistance should generate independent capacities, build or empower existing institutions, and assist developing the economy and the private sector, by a political dialogue aimed at changing the dynamics of the conflict. 

In his 1992 report, “An Agenda for Peace,” Boutros Boutros-Ghali, then Secretary-General of the United Nations, introduced the concept of peacebuilding, which generally refers to the creation of the political and economic conditions necessary to sustain peace in war-torn societies. As enhancing state capacities is perceived to create those conditions, the "State Building" approach became an almost integral part of the peacebuilding doctrine both in academia and in practice. The approach is based on three dimensions: a security dimension, where human security and general security sector reforms are the main focus; a political dimension, which features elections, transitional justice and the rule of law; and an economic dimension, which promotes economic development through marketization, liberalization and good governance. 

The EU's aid and development policy to the Palestinians illustrates how the state-building approach is being used in practice, as it focuses primarily on supporting the state-building efforts of the  Palestinian Authority, and on aiming to create the necessary conditions for peace in the region.  Currently, most of the EU's development assistance to the Palestinians is channeled through the PEGASE mechanism (French acronym for "Palestino - Européen de Gestion et d'Aide socio-économique”), which is divided into two main tracks: DFS (direct financial support), which includes payment of civil servants' salaries and pensions, payment of social allowances to vulnerable Palestinian families and support to East Jerusalem hospitals, and the PEGASE Development Program Cooperation, which focuses on social and economic development. Theoretically, all these actions were meant to consolidate peace in the region in accordance with the state building doctrine. However, according to research published by the Palestinian Monetary Authority in 2011, the lion's share of the EU's aid to the PA is actually used for meeting short-term needs rather than for development actions per se.

According to various economists, a situation where foreign aid is consumed and not invested in development projects is ineffective. In fact, foreign aid can be effective in the long term mainly when invested in the human capital, rather than in the physical capital of recipient countries, as human capital enhances both state competence and human capabilities, reducing human deprivation. Thus, effective peacebuilding efforts, which are conducted through state-building and development activities, should invest in the human capital of the recipient community. However, in the case of the EU's aid to the Palestinians, the Palestinian Monetary Authority found that about 72% of total foreign aid to the PA came in the form of budget support for public spending rather than as investment in human capital. 

The first aid track, DFS, was originally supposed to promote human capital and use the leverage of the EU's funds to push for reforms strengthening PA's institutions. However, the EU has been avoiding outcome-based frameworks or using its financial leverage according to evaluation conducted by the EU. Additionally, as there are no public accountability measures relating to the EU's funding of public services, and as there are no integral M&E mechanisms that would report outcomes, the PA's transparency and legitimacy is eroding. Although PEGASE's second track, the Development Program Cooperation, does invest in human capital, and aims at fostering development, it represents only a small fraction of the total financial aid (18%). According to an EU audit conducted in 2014, its effectiveness is also severely limited by constraints on the ground that are not addressed by the EU. Thus, all things considered, it seems that the PEGASE's policy nature is primarily short-term and ineffective in consolidating an independent Palestinian state, and subsequently, creating peace in the region.  

The Palestine Monetary Authority adds that the PA's revenues, although improving, still fall behind in meeting government expenditure, even at the short-term level. Palestinian institutions need an economy to sustain them, and as long as the PA does not have control over its external borders, key natural resources and the movement of goods and people, any scope for viable Palestinian economy is very limited. Accordingly, the PA is in practice not able to achieve objectives in the absence of aid, and is therefore acutely donor-dependent. As long as Palestinian economic development is limited, the PA will keep depending on donor funds, and aid will continue to merely alleviate day-to-day hardship rather than generating self-sufficiency. Moreover, the absence of an EU exit strategy, which could have ensured the improvement of the PA's resilience and have guaranteed sustained development, lacks practical plans to mitigate donor dependency. As such, its outcomes sustainability is severely limited.

Under International Humanitarian Law, Israel should be responsible for delivering assistance and services to the Palestinian population. As Israel does not meet this obligation, it is often argued that aid is in fact relieving Israel of its responsibilities. Moreover, critiques of the current aid policy indicate that Israel benefits economically from donor funds. As exports to the Occupied Palestinian Territories account for approximately 5% of total Israeli exports, and as the majority of these exports are financed by international aid, aid funds are contributing to the Israeli GDP in sums totaling of billions of dollars. As the EU does not apply the principle of conditionality, neither in the case of the PA nor that of Israel, and it is also not willing to use the economic leverage at its disposal to address constraints on the ground, the de facto implementation of EU development assistance to the Palestinians has been at odds with its main objective. Accordingly, the EU's aid policy lacks relevance, and, to a certain degree, its activities are inconsistent with its intended outcomes.