I was in Germany talking to Europeans involved in Middle East issues during the run-up to the Paris conference on Palestinian aid, which on Monday pledged $7.4 billion over three years to the Palestinian half-government headed by President Mahmoud Abbas. Europeans seem again to respond to the challenges of engaging in the Arab-Israeli conflict with their usual financial generosity and political wishful thinking.

The European Union's 27 members and other states can and should respond to the new post-Annapolis situation by carving out a decisive policy that enhances their strengths rather than institutionalizes their weaknesses. It would be collective stupidity for Europe once again to provide billions of euros in aid to Palestinians that are wasted, physically destroyed or totally negated by Israeli militarism, American bias, Palestinian divisions and Arab passivity.

Europeans will provide around $2 billion of the money pledged in Paris, making them collectively the single largest donor to Palestine, while their political role seems to be moving in the other direction. Europe should redress this balance and play a political-diplomatic role that is commensurate with its economic prowess. Europeans should explore how to return to their role as the guardians of the rule of law, international legitimacy, political morality and the international peace-making consensus that is enshrined in United Nations resolutions and global conventions. These are all grandiose aims, I admit, but shouldn't someone stand up for these things if the Americans, Israelis and Arabs do not?

A German diplomat in Berlin deeply involved in these issues explained that the Europeans working behind the scene, while increasing their peacekeeping and economic involvement on the ground, "are developing the tools that allow Europe to influence events," especially by constructively prodding US policy. I see little hard evidence for this view, however sincerely it is held. Europeans seem to ignore the fact that Palestinian economic, political and diplomatic conditions are steadily worsening, as several developments in the past week indicate.

In an unusual political statement, the International Committee of the Red Cross (ICRC) last week called for immediate political action to contain the "deep crisis" in the West Bank and Gaza. It charged that Israeli policies in the Occupied Territories have denied Palestinians the right to live a normal and dignified life. The ICRC director of operations for the Middle East said: "In Gaza the whole strip is being strangled, economically speaking, life there has become a nightmare." The official added that humanitarian aid would not solve the problem.

The Red Cross also issued a report, titled "Dignity Denied," which depicted harrowing everyday conditions for Palestinians who find it increasingly difficult to access jobs, medical care, and even food. The report argued that only "prompt, innovative and courageous political action can change the harsh reality of this long-standing occupation, restore normal social and economic life to the Palestinian people, and allow them to live their lives in dignity."

The World Bank last week added its voice to the grim assessments. The institution found that a combination of new aid pledges and Palestinian government reforms would have little impact if Israel maintained its harsh restrictions on travel and trade.

Also this week, a new public opinion poll by the respected Palestinian Center for Policy and Survey Research suggested that supporting the Abbas-Fatah government financially was unlikely to pummel Hamas into political submission. It revealed that a total lack of confidence in the Annapolis process was keeping Hamas' and Fatah's popularity at the same levels - at 31 percent support for Hamas and 49 percent for Fatah - almost identical to their respective shares last September.

These developments suggest that throwing more money into a situation of continued occupation and resistance is not a sensible policy, but rather must be matched by political action to resolve the root causes of the conflict. Europe would do better to combine its fiscal generosity with parallel political backbone. It may not have the power to prod Arabs and Israelis into successful negotiations. But it does have the moral force to say clearly what such a negotiated peace requires, what the dictates of accepted law and legitimacy are, and how all sides are falling short in their commitments to pursue these routes towards peace and security for Arabs and Israelis alike.

Europe should pause for a moment as it starts signing billions of euros in aid checks for development and security projects that American-supplied Israeli fighter jets are likely to bomb into smithereens again. Europe would do well to reflect on its dilemma, which the respected German think-tank director, Volker Perthes articulated last week: "Europe has steadily become more involved in the Middle East and Arab-Israeli issues in the arenas of economy, diplomacy, politics, security and peacekeeping; but seems less able to translate engagement into influence to change things."