[Palestinians] ...fear poverty if foreign aid lifeline severed

from USA Today

By Matthew Gutman,

QALQILYA, West Bank — Mayor Hashim al-Masri slammed down the phone. "God curse America," he blurted, looking up from his desk.

On the other end of the line was the Palestinian minister of local authorities, Khaled Kawasme, who had just told him that the European Union would suspend its funding of sewage and paving projects in the West Bank and Gaza because Hamas won Jan. 25 parliamentary elections. Masri blames America for pressuring Europe to cut off funds.

For this town of 45,000, where donkey carts often outnumber cars on the street and jobs are few, the European money spells the difference between the gritty town it is and the modern one Masri envisions.

Qalqilya has been a Hamas political stronghold since last May, when the Islamic militant group won all 15 town council seats and the mayor's office. Most international donors yanked their funding at the time, wanting nothing to do with a city government that vowed Israel's destruction. But Masri nudged the bankrupt municipality into the black by selling off municipal vehicles, lowering project costs and putting pressure on residents to pay their taxes.

Now the West Bank town faces another funding crisis. Hamas swept January elections that placed the organization — on the U.S. State Department's and Europe's list of terrorist groups — in charge of the Palestinian Authority. Europe and the United States are using their purse strings to try and isolate the organization.

The money woes are severe:

• On Monday, the European Union agreed to give the Palestinians a $143 million grant before Hamas assumes official control of the government. However, that is far short of the $600 million it gave to the Palestinian government and non-governmental organizations last year.

• The United States has provided more than $1.5 billion to the Palestinians since 1993, according to the State Department. This year the U.S. government budgeted $150 million in direct aid and $84 million to a United Nations fund for Palestinian refugees. The $150 million is under review and the State Department has asked the Palestinian Authority to return $50 million not spent last year.

• The United States and Europe said they would continue aiding the Palestinian civilian population by giving to non-governmental organizations.

• Israel has frozen its monthly transfer of about $50 million in tax revenue to the Palestinian Authority. Israeli Acting Prime Minister Ehud Olmert said he won't turn over Palestinian tax revenue to a Hamas-run Palestinian Authority that is "in practice becoming a terrorist authority."

Middle East envoy James Wolfensohn said the Palestinian Authority faces financial collapse within two weeks because of Israel's decision to cut off tax transfers, Reuters reported Monday. He predicted that "violence and chaos" could break out unless a long-term funding plan is developed.

Friendly governments in the region may pick up some of the slack. The largest single pledge so far is a one-time $100 million grant from Iran, according to Hamas spokesman Farhat Asad. Saudi Arabia gives the Palestinians about $15 million a month, according to Palestinian Authority Economy Minister Mazen Sinokrot.

The Palestinians are dependent on the money to build roads and other infrastructure projects in addition to meeting the authority's payroll. The Palestinian government is by far the biggest employer in the Palestinian territories with 150,000 employees — breadwinners for a million Palestinians, or a third of all Palestinians living in the West Bank and Gaza.

"In March, I don't believe we'll be able to pay salaries," Sinokrot said. About 90% of the Palestinian budget is spent on salaries.

"That means the whole system could collapse, bringing unemployment and mass violence with it," Sinokrot said. He said the authority already has an $800 million deficit.

Few residents pay their municipal taxes, "so the municipalities have very little revenue that doesn't come from my ministry," Kawasme said. Even repaving a road or fixing a generator requires foreign aid, he said.

Palestinian President Mahmoud Abbas, a member of the opposition Fatah Party, said the Palestinian Authority is headed for a "financial crisis."

In an interview in his city hall office, Masri said the collapse of income will eventually tug his municipality back into poverty. He said the United States is to blame for "pushing the rest of the world to impoverish the Palestinians."

Yousef Ju'edi, 46, is a father of five and owns a restaurant churning out kebab sandwiches behind the town hall here. He's worried about the government payroll even though he's not a civil servant. "I need them to get paid. When the civil servants don't get their paychecks, none of us will," he said through a haze of barbecue smoke.

Masri said he's been able to stretch Qalqilya's $6 million annual budget farther than his predecessors.

Masri is responsible for making sure the city streets are swept, the boulevards' shrubbery pruned and the cobblestones painted. Now, his flagship project in the municipality, revamping the decrepit electricity grid, is in jeopardy.

Issa Faris, the city's engineer, prides himself on the town's few brownouts.

Over the past year, the Hamas-run municipality operated without new parts, and even managed to pay back some of its electricity debts to its provider — the Israel Electric Company.

But without outside funding and the donation of equipment, "eventually the parts we have for transformers, cables, towers, etc. ... will break or corrode and we won't be able to replace them," he said. "We need that foreign aid."