Brussels - The European Union's executive on Thursday praised the Palestinian Authority (PA) for its efforts to reform its finances and security sector in 2008 despite its battles with Israel and Hamas.

The release of the bloc's annual report on relations with the PA "is an opportunity to praise progress made by the PA Government," EU External Relations Commissioner Benita Ferrero-Waldner said in a statement.

"This progress has been achieved under very difficult circumstances: continued Israeli occupation and increasing political and institutional split between the West Bank and Gaza," she noted.

In particular, the PA achieved "notable progress" in reforming the management of its public finances, consolidating its budget and deploying security forces under its control to Nablus, Jenin, Hebron and Bethlehem, the report said.

However, the split between the PA and militant group Hamas, which controls Gaza, still causes severe problems, as Hamas has set up parallel security structures in territory under its control.

Hamas' actions have "exacerbated the split between the two parts of the occupied Palestinian territory," the report said.

The EU views Hamas as a terrorist organization.

The report also accused the PA of "misusing" military courts to pass death sentences on civilians and cracking down on press freedom by arresting 32 journalists without due process over the course of the year. (dpa)