The Palestinian Authority Face Financial Collapse

The Palestinian Authority is facing financial collapse now that Israel blocked tax transfers, as a response to Hamas' victory in the elections. The European Union is expected to continue providing funds of millions of euros in order to prevent an emergency situation, after Israel stopped a sum of €41 million.

The meeting of E.U.'s ministers has to decide their next action after Hamas takes control of the Palestinian authority. The E.U. considers offering €39.6 millions for the utilities and authorizing the World Bank to pay the salaries of the Palestinian Authority employees by providing €50 million.

However, these sums are conditioned; Hamas must stop the violence, recognize Israel and start peace efforts. Hamas is still considered a terrorist group, not only by the U.E., but by the United States as well. The E.U. is considering forwarding the funds directly to the Palestinian president, Mahmoud Abbas, but they fear that this action will lead to the rejection of his movement, namely Fatah.

James Wolfensohn, international envoy, stated: "Unless a solution is found, we may be facing the financial collapse of the Palestinian Authority within two weeks. I know I do not need to tell each of you that the failure to pay salaries may have wide-ranging consequences -- not only for the Palestinian economy but also for security and stability for both the Palestinians and the Israelis." Still, there are differences on how Hamas will be convinced to give up violence and to recognize Israel.

Wolfensohn suggested a meeting "to discuss mechanisms which we can all countenance without violating any of our own laws and policies". The goal is to "ensure the government structure we have all helped the Palestinians develop over these years is maintained and avoid the chaos that is likely to ensue if we do not adopt a common and effective strategy in the near future."