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

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

Under Palestinian Authority Prime Minister Salam Fayyad, the Palestinians 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 Palestinian state will ever emerge. The Palestinians are now turning to the United Nations for a largely symbolic statehood recognition.

The diplomat spoke on condition of anonymity because of the sensitive nature of the matter.

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

Palestinian government spokesman Ghassan Khatib said Israel was to blame for their assistance needs.

"We look forward to the day when the occupation will be over, so as to end our need for foreign assistance," Khatib said.

Foreign donations make up about a quarter of the Palestinian Authority's $3.7 billion annual budget. 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.