Israel has charged that European Union funds are being used to finance Palestinian insurgency attacks against the Jewish state.

A senior Israeli intelligence source said tens of millions of dollars are being sent by the EU directly to PA Chairman Yasser Arafat. The source said Arafat uses the money to pay his security forces to launch or aid in attacks against Israel.

 "For a time, EU funding used to be directed toward specific projects," the source said. "Now, it goes straight to Arafat, who has complete discretion over the money. We know that this is a source of funding to ensure the continuation of the uprising."

Last week, the European Commission approved an allocation of 30 million euros for direct budgetary assistance to the PA. This means that Arafat will be allowed to use the money as he sees fit.

EU spokesman Gunnar Wiegand said the Europeans regard the PA a "necessary partner to fight the extremists and to work for peace." Wiegand said the latest funding seeks to compensate for the halt in Israeli money transfers to the PA. The EU funding is meant for the next three months.

The Israeli intelligence source said Israel has raised the EU funding with European officials. The source said Saudi Arabia and other Gulf Arab allies have provided the lion's share of funding meant to continue the insurgency against Israel.

On Tuesday, Hamas, Islamic Jihad and the Popular Front for the Liberation of Palestine announced that they would not comply with Arafat's earlier call to stop attacks against Israel.

Earlier, three Israelis were injured, one seriously, in drive-by shootings near the West Bank Jewish settlements of Neve Tsuf and Ofra, close to Ramallah. On Tuesday morning, an Israeli was injured in a drive-by shooting near Nablus.

 Palestinians continued to fire mortars at Israeli settlements in the Gaza Strip. No injuries were reported.

On Monday, a 13 year-old Palestinian boy was killed by Israeli troops near Khan Yunis in the Gaza Strip when he approached an Israeli checkpoint waving a toy gun, a present from his father for the Id El Fitr holiday.

Palestinian insurgents are currently planning showcase attacks against Israel, aimed at Israeli buildings and centers, Israeli senior security sources said. The sources said that suicide bombers are being prepared for double attacks in Israel.

At least two attacks will be perpetrated simultaneously. Israel radio reported that the sources said that the main training centers for Palestinian insurgents are based in the West Bank towns of Jenin and Nablus.

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