Egypt predicts Iran will fill Palestinian cash gap

Reuters:

Egypt predicted on Wednesday that Iran would step in to fill the finance gap if the United States and Europe stop their aid to the Palestinian Authority.

"Iran will give them the money, I think," intelligence chief Omar Suleiman told reporters after talks between Egyptian President Hosni Mubarak and Palestinian President Mahmoud Abbas.

Suleiman was answering a question on what would happen if the Palestinians lose financial support from the West after the militant Hamas movement won parliamentary elections.

The United States and the European Union, main donors to the Palestinian Authority, have threatened to suspend aid to a Hamas government unless it recognizes Israel and renounces violence.

Israel took a first step on economic sanctions against the Palestinians on Wednesday when it decided to halt tax payments due to the Palestinian Authority.

Egyptian Foreign Minister Ahmed Aboul Gheit told a news conference with Israeli Foreign Minister Tzipi Livni: "We ask Israel to free all Palestinian tax money and we do not support the punishment of the Palestinian people."

Suleiman agreed. "I think it (suspending aid) will be a punishment for the people, which we don't want," he said.