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PNA may collapse if sanctions imposed after UN bid

(Xinhua)

10:04, September 21, 2011

RAMALLAH, Sept. 20 (Xinhua) -- The Palestinians are intending soon to submit a request to the United Nations Security Council for full membership of a Palestinian state within the 1967 border lines amid a severe financial crisis due to a drop in foreign aid to the Palestinian National Authority (PNA).

However, the worse is coming, mainly after Israeli officials threatened to impose economic sanctions in response to the Palestinian UN bid, such as withholding the tax revenue dues, which represents one-third of the PNA's annual budget, in addition to tightening restrictions on the West Bank.

In parallel to the Israeli threats, the United States congressmen threatened to cut off the annual U.S. financial aid to the PNA, which is half a billion U.S. dollars, and well-informed diplomatic sources said similar sanctions might be imposed on the PNA by Arab and European countries.

Palestinian chief negotiator Saeb Erekat said in response to these threats that in case the bid for statehood is vetoed by the United States, sanctions are imposed and transfer of tax revenues are halted, "I believe Israel in this case would turn into a state of occupation of Palestine from the river to the sea."

SEVERE FINANCIAL CRISIS

The PNA, which has exerted tremendous efforts in coordination with professional experts over the past two years in building up various establishments of an independent state, is currently suffering from a severe financial crisis, where a deficiency in its budget hits 1 billion dollars.

Samir Abdulla, director of the MAS Center for economic researches in the West Bank, said the current financial crisis led to a clear retreat in the economic growth over the past three years, a fact that was proved by the World Bank.

The World Bank said in a report published this year that the lack of foreign aid may lead to the collapse of the progress the PNA achieved in building up its state establishments. The report urged Israel to relax its restrictions on the Palestinian economy for permanent reform.

Palestinian economists said the situation of the Palestinian economy is still fragile and unstable despite the success it has achieved, because the Palestinian authority's budget still depends on foreign financial aid, in addition to Israel's control imposed on the Palestinian economy.

POLITICAL CRISIS

Palestinian Minister of Labor Ahmed Majdalani told Xinhua in an interview that the current financial crisis the PNA is suffering from "is real and has negative reflection of a political crisis linked to the pressures practiced on the Palestinians for deciding to go for the UN statehood bid."

"The crisis is accumulative and dates back to several months ago. It was not a result of a disorganization in treating the financial file, but also coincided with the financial crisis of several neighboring countries," said Majdalani, warning of more difficulties after Palestinian President Mahmoud Abbas goes for the bid.

Abdulla said Abbas had faced heavy pressure preventing him from going to the UN, adding that "The West and Israel understand well that heavy economic sanctions on the PNA would lead to its collapse" and the PNA's financial suffering were obvious when it paid half of its employees' salaries.

EMERGENCY PLAN

Palestinian Minister of Economy Hassan Abu Lebda said the PNA premier Salam Fayyad has an emergency plan with tough measures. In addition to a tough spending-reduction plan, Fayyad's government managed to reduce the dependence on foreign aid over the past two years.

The PNA budget for this year has exceeded 3 billion dollars. In 2006, the PNA went through a severe shortage in its budget when foreign aid was stopped after the Islamic Hamas movement won the parliamentary elections and formed a unity government which refused to recognize Israel.

Na'el Musa, the professor in economy at al-Najah University in the West Bank city of Nablus, said in an interview with Xinhua that the Palestinian economy managed to accommodate with the hard economic situation over the past 10 years, and "now the situation is different."

"I believe that in case sanctions are imposed, the fate of the salaries of 180,000 employees will be unclear and they may not find an alternative, where 80 percent of the Palestinian budget goes to the salaries," said Musa, adding that "the PNA would face hard popular protests if salaries are cut off."

However, Palestinian Minister of Planning Samir Abdulla said Israel and the West "know well that the collapse of the PNA would mean that a status of chaos would dominate the region, and then Israel would be fully committed to the situation, a hard thing that Israel won't be able to face."

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