[ppi] [ppiindia] Hamas victory worsens a financial crisis

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http://www.iht.com/articles/2006/01/27/news/vote.php

      Hamas victory worsens a financial crisis  
      By Steven Erlanger The New York Times

      SATURDAY, JANUARY 28, 2006



     


     
      JERUSALEM The victory of Hamas in legislative elections has made only 
more pressing the financial crisis of the Palestinian Authority, which has a 
deficit of $69 million for January and faces slim prospects for finding the 
money from Western countries shaken by the rise of a terrorist group to power, 
Palestinian officials and Western diplomats said Friday. 

      Of the many questions the Hamas victory presents, the need for money to 
pay basic bills and salaries to Palestinians is the most pressing. It will be 
an urgent question when the countries of the so-called quartet that are pushing 
a peace plan for the region - the United States, the European Union, Russia and 
the United Nations - meet to discuss the Palestinian vote on Monday in London. 

      Even before Hamas forms a government, which President Mahmoud Abbas said 
Friday he would ask Hamas to do, the Palestinian Authority has run out of 
money. Abbas's emergency fund-raising trips to the oil-exporting countries of 
the Gulf produced some contributions, but not enough, and the authority is 
unable to borrow further from local banks, its credit exhausted and its future 
prospects murky. 

      "They don't have enough to get through the end of the month," said a 
Western diplomat. "The United States and the European Union both consider Hamas 
a terrorist organization, and we don't provide money to terrorist organizations 
or members of terrorist organizations." 

      James Wolfensohn, the quartet's envoy to the Middle East, said at the 
World Economic Forum in Davos, Switzerland, on Friday: "The crunch time is next 
week. The Palestinians are basically bankrupt." He said there was not enough 
money to pay the salaries of 135,000 civil servants, including about 58,000 
members of the security forces, adding that this could lead to "chaos." 

      Because Hamas has not yet formed a government, Abbas has asked for 
American help to try to persuade the Gulf countries to provide more aid now, 
and to ensure that Israel delivers the $40 million to $50 million owed to the 
authority from tax and customs receipts, which Israel collects and is supposed 
to turn over to the authority. 

      Israel has made it clear that it will not deal with a Palestinian 
Authority run by Hamas. Acting Prime Minister Ehud Olmert said Thursday that 
Israel would not negotiate with a government that includes any members "of an 
armed terrorist organization that calls for the destruction of the state of 
Israel." 

      Joseph Bachar, director general of the Israeli Finance Ministry, raised 
the question of whether Israel would continue to transfer the tax and customs 
receipts - a process set up under the Oslo accords that created the Palestinian 
Authority - if the authority is run by Hamas, which does not recognize the 
accords. "We will face practical problems of how you deal with people that call 
for the destruction of Israel," Bachar said. 

      But the departing Palestinian economy minister, Mazen Sinokrot, said that 
the funds belonged to the Palestinians. "This is not donor money," he said. 
"They have to bring the money, the money for the Palestinian people, they 
really cannot think otherwise." 

      He said the 135,000 employees were the breadwinners for 30 percent of 
Palestinian families. "If these salaries do not come in, this is a message for 
violence." 

      Israeli officials suggested that Olmert would agree to release this 
month's money, since a Hamas government has not been formed, but questioned 
whether Israel would agree to give any money to Hamas in the future. 

      The Israeli foreign minister, Tzipi Livni, said in a statement aimed at 
the Monday quartet meeting: "The significance of the elections in the 
Palestinian Authority is very grave, by the nature of things. The message that 
I have been conveying in the past two days, to all of the foreign ministers 
with whom I have spoken, is the need for a very clear and unequivocal message 
by the international community that says that elections are not a laundromat 
for terrorism, that the test is going to be one for the Palestinian Authority, 
that the elections do not cleanse Hamas of the terrorism with which it is 
tainted and that if it continues down that course the result will be the 
absolute lack of legitimacy for the Palestinian Authority in its entirety." 

      The financial crisis has little to do with Hamas. Last summer the 
authority broke its promises to the World Bank and the donor countries by 
raising salaries for public employees, a number swollen by the effort to absorb 
armed young men into the security forces. Its $1 billion in revenues is now 
taken up by salaries, the World Bank said, leaving an expected budget deficit 
for 2006 of $600 million to $700 million - only about $320 million of which 
would be covered by contributions from the United States, Europe and Arab 
countries. 

      The finance minister at the time, Salam Fayyad, quit and in December the 
donor countries decided to withhold a semi-annual slice of $60 million in aid 
to promote better discipline. 

      The plan was to assume a Fatah victory in Wednesday's elections and the 
formation of a new, more technocratic government, probably led by Fayyad as 
prime minister. Donor countries and the World Bank were working on a 
restructuring program for the authority that would cover its large financial 
debt for the next few years in return for serious reforms and job-creation 
programs. 

      But the victory of Hamas has exploded all those assumptions. 

      It has also called into serious doubt the likelihood that the United 
States and the EU will continue to aid a Hamas-led or -dominated authority. 
Direct payments would be banned by U.S. law, and many European countries have 
said they will not continue to aid the Palestinian Authority until Hamas agrees 
to recognize Israel and disavow violence - which Hamas has said it will never 
do. 

      The development minister for the new German government, Heidemarie 
Wieczorek-Zeul, said Friday that aid to the Palestinians depended on Hamas 
renouncing violence and recognizing Israel. A spokesman for Chancellor Angela 
Merkel, scheduled to visit the region next week, said Friday: "The recognition 
of Israel's right to security and to exist remains an irrevocable cornerstone 
of German foreign policy." Merkel will meet Abbas but no Hamas officials. 

      Hamas officials have played down the problem, saying that the old 
Fatah-run government wasted and stole so much money that less aid will be 
needed. They also say that they will appeal to the Arab and Muslim world, which 
gives large amounts of aid to Hamas. 

     
         


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