Donors pledge $4.48 billion to rebuild Gaza

SHARM EL-SHEIKH, Egypt (Reuters) - International donors pledged $4.481 billion on Monday to help the Palestinian economy and rebuild Gaza after Israel's three-week offensive, insisting their funds bypass the territory's Hamas rulers.

Gulf Arab states, the United States and the European Commission made significant pledges. Egyptian Foreign Minister Ahmed Aboul Gheit told a news conference the pledges were new and would be paid over the next two years.

The United Nations and aid agencies said rebuilding the coastal enclave was a daunting task so long as border crossings with battered Gaza remained closed.

"The situation at the border crossings is intolerable. Aid workers do not have access. Essential commodities cannot get in," U.N. Secretary-General Ban Ki-moon told donors at a one-day conference on Gaza in the Egyptian resort of Sharm El-Sheikh.

"Our first and indispensable goal, therefore, is open crossings. By the same token, however, it is therefore essential to ensure that illegal weapons do not enter Gaza," he said.

Israel and Hamas were not invited to the conference which Egypt had called for after the end of Israel's military offensive in Gaza in January. The Jewish state says it supports efforts to help Palestinians in the strip, but wants assurances the aid money would not reach Hamas militants.

"We definitely don't want to see the goodwill of the international community exploited by Hamas and serve Hamas's extremist purposes," said Mark Regev, a spokesman for Israeli Prime Minister Ehud Olmert.

The Israeli offensive killed 1,300 Palestinians. Thirteen Israelis also were killed. The West shuns Hamas because it refuses to recognize Israel, renounce violence and accept peace deals with the Jewish state.

The Islamist Hamas, which is holding talks to form a unity government with the rival Fatah group of Palestinian Authority President Mahmoud Abbas, said the boycott would undercut reconstruction efforts.

"To bypass the legitimate Palestinian authorities in the Gaza Strip is a move in the wrong direction, and it deliberately undermines the reconstruction," Hamas spokesman Fawzi Barhoum said in Gaza.

NO MONEY TO HAMAS

The Palestinian Authority had hoped to raise $2.78 billion at the event, including $1.33 billion for Gaza.

U.S. Secretary of State Hillary Clinton pledged $300 million for Gaza reconstruction and $600 million to support the authority's budget shortfalls, economic reforms and security and private sector projects run by the PA.

She was adamant that none of the money, which has to be agreed by the U.S. Congress, would go to Hamas.

"We have worked with the Palestinian Authority to install safeguards that will ensure our funding is only used where and for whom it is intended and does not end up in the wrong hands," she said.

The European Commission pledged 440 million euros ($554.1 million) for Gaza and Palestinian Authority reforms, compared to 487 million euros in 2008. Gulf Arab states pledged about $1.65 billion and said their donations will go through a special mechanism launched on Sunday in the Saudi capital.

Western diplomats said donors in 2007 had pledged $7.7 billion in aid over three years, but the Palestinians complained that only a fraction of that money was paid out on time.

It also remains unclear whether Israel would open Gaza's border crossings to large quantities of supplies like cement and steel needed to rebuild. Israel refuses the entry of materials it says could be also used by militants to build rockets.

"Gaza should not actually be a prison with open skies," French President Nicolas Sarkozy said through an interpreter.

Israel tightened its grip on Gaza's border crossings after Hamas took control in June 2007, and says it will closely manage Gaza reconstruction by requiring project-by-project approval and guarantees that projects will not benefit Hamas.

Egypt, which also borders Gaza, refuses to open its Rafah crossing for normal traffic, rather than for limited access.

British Foreign Secretary David Miliband said aid needed to reach Gaza, be well spent and sustained. "Otherwise the saga of reconstruction and destruction will go on and on," he added.

(Additional reporting by Will Rasmussen in Sharm El-Sheikh, Nidal al-Mughrabi in Gaza, Mohamed Assadi in Ramallah, writing by Alaa Shahine)