The Palestinian National Authority (PNA) needs nearly one billion U.S. dollars to cover shortage in its budget, Prime Minister Salam Fayyad said Tuesday.

His remarks came as Germany pledged to pay 42 million euros (60 million dollars) in support of the PNA over the next year.

Also on Tuesday, the PNA and the European Union (EU) signed an agreement to support educational, health and development projects in East Jerusalem. According to the agreement, the EU will pay six million euros (8.6 million dollars) to implement these programs.

Fayyad said that the deficit in the PNA's budget started in the middle of 2010 which has reached 970 million dollars.

Meanwhile, the Palestinian Ministry of Planning said that it had signed an agreement with Germany for the year 2012. A statement by the ministry said that the future German fund of 24.5 million euros (35 million dollars) will be used for developing sewage treatment systems, creating a dump for solid materials and supporting local municipalities.

EU is the biggest donor to the PNA, with an annual support of nearly one billion euros (1.43 billion dollars).