- The Washington Times - Wednesday, April 5, 2006

TEL AVIV — Palestinian Prime Minister Ismail Haniyeh said his newly installed Cabinet inherited a government with empty coffers, raising concern about unrest if the Palestinian Authority misses salary payments for more than 100,000 employees.

Speaking at the first meeting of the Hamas-led government, Mr. Haniyeh said a monthly $55 million aid package offered by Arab countries is “not sufficient.”

Complicating the financial picture, Palestinian Finance Minister Omar Abdel Razeq said he was surprised to find at least $1.2 billion in debt to private creditors.

“The size of the borrowing was so big that it was difficult to comprehend,” Mr. Abdel Razeq said.

The government paychecks are one of the last buttresses of an economy beleaguered by more than five years of fighting. Mr. Haniyeh’s comments were seen as an effort to deflect blame in case of widespread turmoil caused by the Palestinian Authority going bankrupt.

“It’s not really clear who the public will lash out at,” said Sam Bahour, a Ramallah businessman. “They may lash out at the existing government, or they may lash out at the previous government. They may lash out at the president’s office.”

The government has been kept afloat over the years by aid from Western donors, but they have frozen payments until Hamas recognizes Israel and renounces violence. Israel has frozen customs revenue collected for the Palestinians.

The Palestinian Authority is still waiting to get about $50 million in aid from Saudi Arabia, Kuwait and Qatar to cover March public-sector salaries. Last week, the Arab summit in Sudan approved a $55 million annual aid package for the Palestinians.

Officials loyal to Palestinian Authority President Mahmoud Abbas, the leader of the outgoing Fatah party, said Hamas had distorted the scope of the crisis. The government has always teetered at a break-even point and missed salary payments, a spokesman said. The Palestinian Authority’s treasury is empty not because of poor management, but because of Hamas’ refusal to change its stance on Israel, he said. Palestinian negotiator Saeb Erekat said Hamas needs to accept international demands to recognize previous agreements signed with Israel.

“The prime minister made it sound today as if he received a collapsed authority,” Mr. Erekat said. “It has always been like this. We have no gold mines. But we have done our best to get international aid.”

In the sparring between Hamas and Fatah for control, Mr. Haniyeh reportedly froze all government appointments made by Fatah. News agencies reported that Mr. Abbas issued a decree to transfer all authority over the Palestinian security services to the presidency.

Fatah officials also have refrained from offering help in raising money from abroad to underwrite the Palestinian government.

“Fatah has good connections with Arab countries, but they don’t want to intervene,” said Samir Barghouti, a Ramallah analyst. “They are saying this is a Hamas job, and they can solve the problem by themselves.”

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