Monday, January 30, 2006

Hamas faces cash crisis, as Israel stops tax funds

Times Online:

The price of Hamas's victory in the Palestinian parliamentary elections started to become clear today as Israel refused to hand over nearly £25 million in monthly tax revenue to the Palestinian Authority.

As unrest escalated on the streets - with 30 Fatah-supporting policemen briefly storming the parliament building in Ramallah this morning - the acting Israeli Prime Minister, Ehud Olmert, said he would not transfer monthly customs duties to the Palestinian Authority because he feared it would finance terrorism.

"It must be made very clear, we are not going to transfer funds which could finance terrorist attacks against our civilians," he said. Hamas is responsible for more than 60 suicide bomb attacks against Israel.

Israel is due to hand over 200 million shekels (£24.4 million) in sales and income tax revenue to the Palestinian government on Wednesday. The monthly payment often covers salaries for public officials and security forces in the Palestinian territories.

The stand-off developed as European ministers met in Brussels to hammer out the EU's formal response to Hamas's landslide victory in the Palestinian parliamentary elections last week.

Even though the Islamist group has yet to form a government, it has already been repeatedly warned by the US, Israel and the EU that the Palestinian Authority will face a crippling cut in international aid unless it renounces violence and recognises Israel's right to exist. Its leaders have so far refused.

Javier Solana, the EU Foreign Policy Chief, reiterated the warning this morning. Before the meeting he told reporters that the EU, the largest donor to the Palestinian territories, would not hand over €500 million (£343 million) in aid this year unless Hamas abandoned terrorism.

"They have been a terrorist organisation. They have to change their methods and they have to accept that violence is incompatible with democracy," he told AFP.

"They have to also recognise Israel, because in the end what we are trying to do is construct a two-state model and to do that, you have to talk to the other," he said.

Angela Merkel, German Chancellor, was visiting Israel and the Palestinian territories today to increase pressure on Mahmoud Abbas, the Palestinian President, to adopt pressure the new ruling party to acceed to the European demands.

"The Palestinian President has a huge responsibility and I will tell him this when I meet him today," Ms Merkel said. "As a president, he should urge Hamas to respect certain principles."
After today's EU meeting, ministers from the so-called quartet of the UN, the US, Russia and the EU, charged with implementing the Middle East road map, will also convene to make a unified response to Hamas's victory. The Palestinian group won an outright majority in the 132-seat parliament, against 45 for Fatah, in its first elections.

The US Secretary of State, Condoleezza Rice, yesterday signalled the hard line that America expects its allies to take against a Hamas-led government.

"The United States is not prepared to fund an organisation that advocates the destruction of Israel, that advocates violence and that refuses its obligations", said Dr Rice.

In the past, Hamas has disavowed negotiations as a way to resolve the Middle East crisis. The US gave more than $200 million (£113 million) in aid and $70 million (£39 million) in direct funding for the Palestinian Authority last year.

So far, Hamas has responded indignantly to threats to cut off international funding to the Palestinian population, calling it blackmail.

Today Mushir al-Masri, a spokesman for Hamas, hinted that the group would seek more funding from Arab nations: "Stopping international donations will not undermine the work of the government," he said.

But the Palestinian territories are buckled under widespread poverty and unemployment, as well as the strict border controls maintained by the Israeli government. The Palestinian Authority routinely runs at a $1 billion (£563 million) a year shortfall, which until now has been made up by international aid.