New York TImes Take on Palestine Heist

Gaza public servants to get Israeli funds
Steven Erlanger in Jerusalem
July 3, 2007

THE Israeli Government has agreed to restore full financial ties with the Palestinian Authority now that its President, Mahmoud Abbas, has decreed an emergency government with no Hamas members. Israel will resume transfers of taxes to the Authority and return - in instalments - about $US600 million ($707 million) withheld from the Palestinians since early last year.

On Sunday Israel transferred about $US120 million, the equivalent of a month's payroll for the entire authority.

The decision ends an Israeli policy of fiscal isolation of the Palestinians that began with the installation of a Hamas-run government in March last year, after Hamas won a legislative majority, beating the rival Fatah faction. The policy, together with a Western ban on aid to the Hamas government, was designed to undermine that government and bring it down, officials conceded at the time.

Now with Hamas having taken over the Gaza Strip, Mr Abbas, of Fatah, has sacked a Hamas-dominated "unity" government and installed an emergency cabinet led by Salam Fayyad, an independent economist close to Fatah.

Israel and the US are trying to bolster Mr Abbas, who favours a peaceful negotiated solution with Israel, and help him create a functional society in the West Bank. Israel views Mr Abbas as weak and indecisive, but officials see that by sacking the old government, he is finally standing up to Hamas.

Mr Fayyad, educated in Texas and a former economist with the World Bank and the International Monetary Fund, is prime minister, finance minister and foreign minister.

As finance minister he will be receiving direct transfers from the Israeli treasury and from the West. It remains to be seen whether the European Union, which has been paying part of the salaries of up to 80,000 Palestinians through direct transfers to their bank accounts, will now revert to putting its aid - $US900 million last year - solely through Mr Fayyad.

Mr Fayyad has said he plans, as prime minister of the new government, also to pay Palestinian public servants in Gaza. Many Palestinian Authority employees in Gaza work in health and education, and it would be politically impossible for Mr Fayyad to spend all Palestinian income solely in the West Bank. But how he will pay Palestinian security forces in Gaza without financing Hamas, at least indirectly, is unclear.

"Whether he pays Gaza salaries is not our business," said Miri Eisin, a spokeswoman for the Israeli Prime Minister, Ehud Olmert. "This is a Palestinian government that has already outlawed all armed groups outside the official security services, and we want to co-operate."

The New York Times