UN concerned at potential Palestinian financial collapse

The UN today became the latest international agency to caution that Israel and the West stand to unleash a crisis in Palestinian territories by withholding hundreds of millions of dollars in aid and tax transfers.

The flow of money has been jeopardised by the militant Islamic Hamas group’s landslide victory in the January 25 Palestinian elections. The group has killed hundreds of Israelis in suicide bombings, and has refused since its election victory to abandon its calls for Israel’s destruction.

Earlier this month, Israel’s Cabinet decided to stop sending the Palestinian Authority the €46m in taxes and customs duties it collects on its behalf monthly from Palestinian merchants and labourers who work in Israel.

And the US and European Union, which like Israel consider Hamas a terrorist organisation, have threatened to cut off hundreds of millions of dollars in aid once a Hamas-led government is installed next month.

In a report released today, the UN Office for the Coordination of Humanitarian Affairs cautioned that non-payment of the tax and customs transfers would bring the Palestinian government to the brink of collapse by limiting its ability to provide basic services such as health, education, utilities, sanitation and policing.

The transfers pay a large proportion of the salaries the Palestinian Authority pays to the 150,000 people on its payroll, the agency said, citing figures that are slightly higher than official numbers.

Failure to pay salaries would strip an estimated 25% of the total Palestinian population of their livelihood, because the salaries support extended families, the report said.

The agency noted that nearly half of the people on the Palestinian payroll are security personnel. If they aren’t paid, the UN report warned, that “could risk a rise in criminality, kidnapping and protection rackets”.

While Israel has already taken action to turn off the taps, the West has been less forceful, wary of causing an economic collapse and consequent chaos in Palestinian territories.

Washington has continued to threaten to withhold money from Hamas once its government is formed, but on the other hand, has promised to keep humanitarian aid coming.

The European Union, meanwhile, agreed on Monday to provide €119m in urgent aid for Palestinians before a Hamas government takes office. It kept silent on what it would do once Hamas assumes control.

Hamas spokesman Sami Abu Zuhri welcomed the EU’s decision and said it proved that Israeli and US efforts to stop international aid had failed.