Political and fiscal crises have engulfed the Hamas-led Palestinian government since it took office in March, while harsh Israeli attacks have battered the overcrowded Gaza Strip, a stronghold for Hamas.
POLITICAL AND FISCAL CRISES
For the Palestinians, the most significant event in 2006 was the startling victory of the Islamic Resistance Movement (Hamas) in the second legislative elections after it defeated the long- dominant Fatah movement in January.
But the victory of Hamas, bent on resisting Israel's occupation and rejecting signed peace agreements with Israel, did not save the Palestinians from sufferings.
The Hamas-led cabinet had to face a grave fiscal crisis after key donors cut off all direct aid due to Hamas' refusal to meet their demands of recognizing Israel, honoring previous peace accords and renouncing violence.
Three months after the Hamas government took office, its spokesman Ghazi Hamad said that the government "does nothing except working on securing money."
Failing to pay salaries for almost 165,000 public servants, the government also bore a daily loss of about 1.1 million U.S. dollars and witnessed a high unemployment rate of 50 percent.
Most of governmental projects have stopped due to Israel's closure of Gaza commercial and passenger crossing points, lack of raw materials and suspension of international aid since Hamas took office, the Ministry of National Economy said.
Since the beginning of a Palestinian uprising in late 2000, direct and indirect losses due to Israeli siege have exceeded 15 billions dollars, according to figures released by the ministry.
"Improving the economic situation is also linked to lifting of Israeli blockade and release of withheld tax revenues that have exceeded 600 million dollars," Minister of National Economy Alaa al-A'raj told Xinhua.
The economic hardship facing the Hamas-led government undoubtedly led to a deteriorating political plight when the labor union has been going on general strike since September to claim overdue wages of government employees.
"There has been internal pressure because the people have starved and lost security and disagreement has grown," said Abdullah al-Hurrani, an intellectual.
Al-Hurrani, who is also a member of the Palestinian National Council, or the parliament, said that Hamas lost much of its popularity due to the lack of money and siege imposed by the West on the Palestinians.
"I voted for Hamas in the elections because they promised to reform and change our situation, but month after month, I found out that Hamas did not fulfill what it promised to voters," said Khamis Abdel Sallam, a teacher in Gaza.
Political analyst Talal Oukal said, "I think the Hamas-led government is in a political impasse."
"The cabinet's experience in governing is hard, though it is aware that being in opposition is different from being in office," he said.
In order to tackle the standoff, Hamas and Fatah have for months been discussing the idea of forming a national unity government, hoping that such a coalition government would meet international demands for the sake of lifting blockade.
But inter-Palestinian talks over the issue reached an impasse despite cautious optimism that a new coalition is imminent.
On Dec. 1, President Mahmoud Abbas convened a Palestine Liberation Organization Executive Committee meeting in the West Bank city of Ramallah and decided to freeze dialogue with Hamas on forming a new unity government.
Al-Hurrani said that there would be no new government "if Hamas keeps its stance."
Counting on their power in the parliament, Hamas insists on nominating a new prime minister and having the highest number of portfolios than any other parties.
"As President Abbas is tending to approve Hamas' candidate Muhammad Shubair as the prime minister to head the new government, the ruling Hamas movement should be content with this and leave the authority for Abbas to oversee the process of forming the coalition," said al-Hurrani.
Misfortunes never come singly. On June 25, three Palestinian militant groups, headed by the armed wing of Hamas, kidnapped an Israeli soldier and killed two others in a cross-border attack, sparking an Israeli military offensive against the Gaza Strip three days later.
Aiming to rescue captive soldier Gilad Shalit and halt rocket firing by Palestinian militants, Israel launched the "Summer Rains " operation against the Gaza Strip, the first since Israel withdrew from the coastal strip in September 2005.
The fierce offensive targeted every Hamas-linked body, including buildings of the cabinet and several ministries, and even destroyed Gaza's only power plant.
According to local human rights centers, up to 500 Palestinians have been killed in the Gaza Strip since capture of Shalit.
At the beginning of November, Israel unleashed a raging operation dubbed "Autumn Clouds" against northern Gaza Strip in response to an increasing rocket attack and failure to reach a deal on prisoners' swap.
"Autumn Clouds," the deadliest in years, claimed lives of more than 200 Palestinians.
"2006 was the most difficult year for the Palestinians and the political process," al-Hurrani said.
Following months of mutual accusations and feud between Hamas and rival Fatah of President Abbas, the Israeli offensive has somewhat united militants who eventually agreed on a truce with Israel.
A Palestinian-Israeli ceasefire went into effect on Nov. 26, ending five-month Israeli offensives on the strip.
To sustain the fresh but fragile truce, Israeli Prime Minister Ehud Olmert offered to reduce checkpoints, release frozen fund and free Palestinian prisoners in exchange for Shalit, raising hopes that the truce would lead to new peace efforts.