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James Wolfensohn Photo: Reuters
James Wolfensohn Photo: Reuters
 
 

Quartet envoy: PA faces financial collapse

James Wolfensohn says Palestinians face financial collapse within two weeks now that Israel has cut off tax transfers in response to Hamas’ election victory; PA will need USD 60 million to USD 80 million next week to begin to pay wages for February, he adds

Reuters
Published: 02.27.06, 11:43 / Israel News

International envoy James Wolfensohn said the Palestinian Authority faces financial collapse within two weeks now that Israel has cut off tax transfers in response to Hamas’ election victory.

 

Even if the Palestinian Authority survived with emergency funding, the financial crisis could bring violence and chaos unless the Quartet of major peace mediators developed a long-term funding plan once a Hamas-led government is in place, Wolfensohn said in a letter released on Monday.

 

‘Failure to pay salaries may have consequences’

 

Wolfensohn was expected to brief the Quartet, made up of the United States, the European Union, the United Nations and Russia, on his findings later this week.

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Wolfensohn’s office declined to comment on the Feb 25 letter, which Reuters obtained from a member of the Quartet.

 

In the letter, the Quartet’s special envoy said the caretaker Palestinian government faces a funding gap of USD 100 million this month and up to USD 70 million in March, mainly because of Israel’s decision to withhold USD 50 million to USD 55 million a month in tax revenue.

 

“Unless a solution is found, we may be facing the financial collapse of the PA (Palestinian Authority) within two weeks,” Wolfensohn wrote in the letter.

 

He said the Palestinian Authority will need USD 60 million to USD 80 million next week to begin to pay wages for February.

 

“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,” Wolfensohn said.

 

But any money raised by Wolfensohn at the Quartet’s direction would only tide the Palestinian Authority over until the new Hamas-led cabinet is formed, most likely next month.

 

The Quartet has yet to agree on what to do once Hamas takes over. There are differences of opinion in the mediating group over how to exert pressure on Hamas to renounce violence, recognize Israel and honor interim peace deals.

 

Wolfensohn proposed a meeting of the United Nations and key donors in the second week of March “To discuss mechanisms which we can all countenance without violating any of our own laws and policies”.

 

He said the goal would be 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.”

 

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