RAMALLAH, West Bank (AP) — Palestinian officials said Sunday they won't be able to pay upcoming public-sector salaries that support nearly one-third of Palestinian families in the West Bank and Gaza, the clearest sign yet that Israeli economic sanctions are starting to bite.
Israel last month stopped the transfer of tax revenues and other funds it collects on behalf of the Palestinians, retaliation for the Palestinians' successful bid for admission to the U.N. cultural agency UNESCO, which was part of a larger effort to gain admission as a state in the world body.
Israel says a Palestinian state should be established through negotiations, and it accuses the Palestinians of acting unilaterally to bypass peace talks.
The monthly transfers of about $100 million, along with hundreds of millions of dollars a year in foreign aid, are crucial for keeping the government of Western-backed Palestinian President Mahmoud Abbas afloat.
Mr. Abbas' prime minister, Salam Fayyad, said Sunday that he won't be able to pay upcoming salaries, which are due in the first week of December.
He said the continued suspension of the tax transfers "has both an immediate impact on the lives of all employees and their dependents, some 1 million people ... (and) has a devastating indirect impact throughout the whole economy."
The Palestinian Authority is the biggest employer in the Palestinian areas, with tens of thousands of civil servants and security forces.
U.N. Secretary-General Ban Ki-moon; U.S. Secretary of State Hillary Rodham Clinton; and Tony Blair, envoy of the Quartet of Mideast mediators, have urged Israeli Prime Minister Benjamin Netanyahu to resume the transfers.
An Israeli official said Sunday that Israel suspended the transfers temporarily to express its concern over the conduct of Mr. Abbas and his government, mainly his quest for recognition of Palestine.
The Israeli official said Israel might make the decision to withhold the money permanently if Mr. Abbas sets up a unity government with Hamas, the Islamic militant group that controls Gaza. The official spoke on condition of anonymity because he was not authorized to discuss the issue with reporters.
A reconciliation agreement between Mr. Abbas and Hamas chief Khaled Mashaal calls for an interim unity government that would prepare for May elections, but it appears unlikely it will be formed because of disagreements over who should lead it. Hamas strongly opposes Mr. Abbas' candidate for the job, the West Bank-based Mr. Fayyad, who is popular with Western donors.
A senior Hamas figure said Mr. Abbas and Mr. Mashaal quietly agreed in a meeting last week to keep their separate governments in place until elections. Mr. Abbas told Mr. Mashaal that the two-government status quo was "convenient for both sides and any change might be costly," according to the Hamas figure, who spoke on condition of anonymity because the leaders did not make their decision public.
Abbas envoy Azzam al-Ahmed denied there was a quiet agreement on shelving the interim unity government and insisted there is "no possibility of holding elections without a unity government."
Keeping the existing governments in place would help Mr. Abbas avoid a Western backlash and continue the flow of international aid to his government. Western powers fear that a unity government, even one composed of technocrats without clear political affiliations, would be heavily influenced by Hamas, which is not internationally recognized.
Top Hamas official Moussa Abu Marzouk said that it was at least possible to skip an interim government and head straight to elections. The Hamas statements suggested that a solution was being finessed to get around the disagreement over keeping Mr. Fayyad.
Also Sunday, Gaza farmers began the seasonal export of produce to Europe.
Israel has banned most exports from Gaza since Hamas seized the territory, but it has permitted seasonal shipments of strawberries, cut flowers and other agricultural goods.
A truckload of strawberries left Gaza to launch the season, which is to run through May.
The number of exports is well above last year's levels.
Before the Hamas takeover, 85 percent of Gaza's outgoing goods were sold in Israel and the West Bank, according to Gisha, an Israeli human rights group that lobbies on behalf of easing Palestinian travel restrictions.
According to Gisha's statistics, about 83 percent of Gaza's factories are idle or operating at 50 percent or less capacity. Unemployment is officially listed at 28 percent.
Associated Press writer Ibrahim Barzak in Gaza City, Gaza, contributed to this article.