Europe's financial crisis is causing some European Union lawmakers to question whether the bloc can continue to deliver hundreds of millions in aid to the Palestinian Authority, an EU diplomat said Thursday.

The EU is the largest single donor to the PA, contributing about €500 million ($720 million) a year to build institutions for a future state and to pay salaries.

Under PA prime minister Salam Fayyad, the PA embarked in 2009 on a two-year state-building plan to be ready for independence by September.

But with peace talks deadlocked, the diplomat said that some EU lawmakers doubt a PA state will ever emerge irrespective of the PA bid for statehood at the United Nations in September, which they believe is merely symbolic.

The earliest the EU could cut back aid would be in 2014, when the next seven-year budget begins.

PA government spokesman Ghassan Khatib said Israel was to blame for the PA's financial crisis, ignoring the fact that numerous donor countries, including Arab oil rich states such as Saudi Arabia, have simply refused to honor their pledges to the cash strapped administration in Ramallah.

"We look forward to the day when the occupation will be over, so as to end our need for foreign assistance," Khatib said. The connection was unclear since Israel is the largest importer of PA goods and employs thousands of its residents.

In July, Fayyad halved the salaries of government employees and appealed to the international community to bridge a $640 million shortfall caused largely by Arab countries' unfulfilled pledges.