The Palestinian economy was on the brink of collapse, and needed an urgent injection of tens of millions of dollars in funding, a senior European official warned yesterday. Mr Terje Larsen, a Norwegian diplomat and one of the pioneers of the collapsed Oslo peace process, who has maintained close ties with the Palestinian Authority in recent years, flew to Stockholm yesterday to seek EU funding for the Palestinians. He had been promised $10 million by Sweden, but was told by American officials no emergency funding could flow from the US without approval from Congress.
Mr Larsen noted that unemployment in Palestinian areas has reached 40 per cent - a conservative estimate given the virtual shutdown of the Palestinian economy, and the ban on almost all Palestinian workers entering Israel since the Al-Aksa Intifada erupted last September.
The failing Palestinian economy is also of concern to the US Secretary of State, Mr Colin Powell, who is due in Jerusalem tonight, and is expected to ask caretaker Prime Minister Mr Ehud Barak and the incoming prime minister, Mr Ariel Sharon, to ease some of the sanctions against the Palestinians. Privately, however, some US officials are blaming the Palestinian Authority for the economic plight of its people, accusing officials of corruption, involving the disappearance into private bank accounts of colossal sums of donated money.
Those same officials say American funding has not been funnelled through the Palestinian Authority but has been directed to specific projects.
Mr Sharon, who is negotiating with potential coalition partners and hopes to take office next week, said on Thursday he told Mr Arafat last week he was "ready to ease conditions, but it should be quiet first . . . But the next day, a new wave of terror began, and Arafat is the person responsible for that".
Meanwhile, in the West Bank village of Al-Khader yesterday, a 21-year-old Palestinian was shot dead in a clash with Israeli troops. Palestinian gunmen fired at Israeli troops in the Ramallah area, and at Jewish settler enclaves in Hebron, drawing return fire.