Editorial: Economic Crisis
Arab News
22 February 2006

Europe and the US threaten to cut aid to the Palestinians unless Hamas renounces violence and recognizes Israel; the Israelis have frozen the transfer of $50 million in customs dues that belong to the Palestinian Authority and which it collects on the Palestinians’ behalf. Palestinian President Mahmoud Abbas says that the Palestinians face an economic crisis.

The economic reality for most Palestinians is harsh: Economic development has been stymied by the intifada and the Israeli closure of the border to both Palestinian labor and exports; unemployment in the Gaza Strip is about 50 percent; aid is an essential way of life for many Palestinians. Nor can the PA do without the customs dues collected by the Israelis. That money pays the salaries of 150,000 teachers, doctors and administrators. And the salaries go to support a fifth of the Palestinian population. In short, the money is a lifeline.

But there will be extra aid. Arab League Secretary-General Amr Moussa thinks Arab and Muslim governments could make up the difference; Syria has proposed that the Arab states do so. Iran has already promised more money and so too has Russia and such groups as the Muslim Brotherhood have launched an international campaign to help their brothers and sisters. But $1 billion a year? That is the amount the Europeans and Americans provide: two-thirds of the foreign aid the Palestinian Authority receives or effectively half its budget. Even that is not enough. According to the World Bank, the PA budget is already overstretched; last year saw a deficit of $800 million. What is needed, the bank says, is more aid, an extra $500 million a year. That means a potential shortfall of $2 billion. There is the other problem: Governments may promise help, but will they in fact hand over the money they have pledged? Some will find it very difficult for another reason — Washington’s hints of action (presumably financial) against those that try to step into the breach; US Secretary of State Condoleezza Rice’s current presence in the Middle East is very much about that plus efforts to isolate a Hamas government.

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