MIDDLE EAST: Israel has frozen €37 million in tax rebates and customs payments it owes to the Palestinians in response to the victory of the militant group Hamas in parliamentary polls last week.
The move violates agreements signed between Israel and the Palestinian Authority, and will generate a financial crisis in the occupied territories where the monthly refunds are used to pay the salaries of around 150,000 government workers.
Palestinian economy minister Mazen Sonnoqrot yesterday decried what he called Israel's "illegal decision", to freeze indefinitely the monthly payments, saying it amounted to "collective punishment". The US and EU have threatened to cut off future funding if Hamas does not reject violence and recognise Israel. But Europe and the US have committed to continue aid while President Mahmoud Abbas's caretaker government remains in power pending the emergence of a new administration under Hamas.
The Palestinian Authority relies heavily on foreign assistance and donors fear the West Bank and Gaza could descend into chaos if funding is suddenly choked off. The US is worried that countries such as Iran and Syria could fill the funding gap and boost their image in the Islamic world just as Washington seeks to isolate them.
A Palestinian official said yesterday that Saudi Arabia and Qatar had pledged €27 million ($33 million) in immediate aid.
Israeli foreign ministry spokesman Mark Regev, said the monthly transfers which Israel collects on behalf of the Palestinian Authority would remain on hold pending a review.
"The expectation is that automatic transfers will not continue," he said, justifying the decision to freeze the payments on the grounds that "there is a concern on our side that the moneys transferred will come back to haunt us in the form of suicide bombings". Mr Regev insisted the move was not a punitive measure against Palestinians. Israel began collecting import taxes and other indirect taxes on behalf of the authority following a 1994 agreement negotiated under the Oslo process. It deducts 3 per cent from each monthly transfer to cover its administrative costs and has frozen payments in the past to put pressure on Palestinians.
The move exacerbates a growing financial crisis in Gaza where an Israeli closure has prevented the import/export of basic goods and medicines for almost three weeks. Hamas has insisted it will not be "blackmailed" by aid cuts into its right to resist forcibly Israeli occupation and will turn to Arab donors to make up budget shortfalls.
Unemployment in the Palestinian territories runs at about 22 per cent, and half the Palestinian population lives in poverty and up to two-thirds of Gazans live below the poverty line.
The funding cut came as Israel's acting prime minister Ehud Olmert sent riot police into the West Bank to remove a small portion of an unauthorised Jewish settler outpost of Amona.
Israeli police and soldiers clashed with mobs of youths while demolishing nine buildings in the outpost yesterday. About 200 right-wing protesters and security forces were slightly injured.
The move followed a court decision against some buildings in the outpost which was built on illegally seized Palestinian land.
