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Palestinian Authority unable to pay salaries, even as it pursues statehood

The Palestinian drive for non-member state status at the UN could trigger Israeli economic retaliation that would end the viability of the Palestinian Authority.

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The PA is trying to keep up business as usual but there is deep concern. In his offices in al-Bireh, near Ramallah, Palestinian Monetary Authority governor Jihad al-Wazir fine tunes the banking system in a bid to keep unrest from surging. On Sunday, after the finance ministry announced it would pay employees up to 2000 shekels as a salary installment, he signed a circular to banks preventing them from taking all that amount as debt on mortgage payments workers owe the banks.

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''I am signing that a bank can only deduct 35 percent of this salary installment for mortgage payment,'' he told the Monitor in an interview as his aide waited for the document. ''Otherwise people won't have money left over for their daily expenses and my expectation is that if that happens, there will be demonstrations in the streets."

Foreign help not coming

Al-Wazir, the US-educated son of Yasser Arafat's deputy Khalial al-Wazir, who was assassinated by Israeli commandos in Tunis in 1988, says the current crisis is the most serious the economy has faced since the launch of self-rule in 1994.

''In the past there were avenues to compensate for the deficits and these avenues have been depleted. I am referring to the avenues of borrowing from the banking system and taking from donors here and there.In the past when the Arabs wouldn't pay, the Europeans did and when the Europeans didn't pay the Arabs or Americans did. But now all iterations in the matrix have been tried and all of them are depleted.''

Foreign donations have dropped from $1.978 billion in 2008 to $983 million in 2011, with Arab, EU and US contributions all falling, according to the World Bank. The US had pledged $200 million for 2012 but the money has not materialized, the bank says.

The World Bank said in a report published in September that the way to ease the crisis is for donors to increase their funding as a short term solution and for Israel to lift strictures on the Palestinian economy, which it says are needed for security reasons. These would include allowing the development of the majority of the West Bank that is under full Israeli control known as area C, so as to boost the private sector. The Bank also says the PA needs to continue with reforms that will cut spending, including civil service reform.

According to the World Bank, the tax transfers account for 70 percent of revenues for the PA. Witholding them will mean that ''the Palestinian Authority definitely cannot continue and that there is an Israeli economic war against the PA,'' according to Samir Abdallah, director of the Ramallah-based Palestinian Economic Policy Research Institute.

Mr. Palmor, the Israeli foreign ministry spokesman, counters that the Palestinian UN upgrade marks a sharp turn away from the path of bilateral negotiations. ''If they breach blatantly the whole framework of the Israeli-Palestinian relationship than there is no way back and Israel will do whatever it sees fit. He who burns bridges should not complain about not being able to get to the other side,'' Palmor says.

In Ramallah, Amjad Rizeq, who employs two workers for his door installing business, says that he has not been able to pay them their salaries during the last three months. ''The workers in the authority get only part of their salary and they want to use it for food not doors. The whole economy is bad. Hopefully there will be an improvement and I can pay them. What can we do?''

Awartani, the an-Najah university economist, asks: ''Can the authority survive the crisis? It's an open question. If you know the answer tell me.''


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