At a time of austerity and belt-tightening, the European Union remains the biggest donor to Third World countries. EU assistance to the developing world serves European values and objectives—but only if EU institutions abide by the highest standards of accountability in managing European taxpayers' money. As a recent report by the European Court of Auditors found, that hasn't always been the case with respect to EU aid to the West Bank-based Palestinian Authority.

Since the 1994 Oslo Agreement, which created the Palestinian...