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RAMALLAH - "I had a wonderful day," Salam Fayyad says with a big smile, in his spacious office. A few hours earlier, the prime minister of the Palestinian Authority had received $150 million from the U.S. consul general in Jerusalem. This is far from the largest amount ever handled by Fayyad, a veteran official at the International Monetary Fund, who holds a Ph.D. in economics. What moved him was the American government's readiness to deposit its rapidly thinning dollars into the PA's bank account. And not in controlled infrastructure or a specific project, but as aid to finance the activities, and even the salaries, of his civil servants. At a time of economic distress in the United States, generous financing like this can truly be considered a certificate of appreciation and trust.

Fayyad worked hard to earn that certificate, and is paying for it in hard political currency. Last Friday, when Fayyad learned that Defense Minister Ehud Barak had decided to send his aide Amos Gilad to the first meeting of the tripartite monitoring team (U.S., Israel, PA) in Jerusalem, his staff drew up a sharply worded declaration, castigating the disdain being shown by the Israeli defense minister for the forum designated at Annapolis to implement the first stage of the "road map," and cautioning their boss that if he took the affront lying down, the Palestinian public would not forgive him. They said (rightly, as it turned out) that Fayyad's political rivals from Fatah, not to mention Hamas, would make a laughingstock over the meeting of a Palestinian prime minister with an Israeli civil servant.

"You have no idea how many important people called to explain to me why I must not go to the meeting," Fayyad says, chain-smoking Marlboros while he is speaking, in English. Still, he says, "I did not have even a moment's hesitation. After all, the tripartite forum is not intended as a favor to us or to you. It is intended to move the process forward. As far as I am concerned, Israel can send anyone it wants. I will attend every meeting, and I don't care if politicians or media commentators lambaste me for it."

He also claims not to have an interest in the struggle over the Muqata that will presumably take place after Palestinian President Mahmoud Abbas (Abu Mazen) retires (next January - "and that's final"). "I do not intend to run for president or to join any party or to establish a new party," he asserts. (Fayyad is not a member of Fatah and was elected as the head of a small independent party.) "This is my last position in political life." What about Marwan Barghouti, who is serving several life terms for terrorism in an Israeli prison? "The time has come to release him. I support that, as I do the release of all our prisoners."

No prison time

Fayyad is 17 years younger than Abu Mazen (who will celebrate his 73rd birthday next week). But there is a black hole in his CV: While his friends were fighting the Israelis and languishing in prison, Fayyad was sitting in the library of the University of Texas, in Austin. On the other hand, among his contemporaries in the political hierarchy, there is no one in whose hands the United States or the other donor countries would rather deposit $150 million - almost with eyes shut. Not to mention a commitment for another $7.5 billion that the donors pledged in Paris last December.

Last month, Fayyad paid a lengthy visit to the White House. After exchanging views with President George W. Bush about the condition of Houston's football team, the guest updated the president about the Annapolis process. Since that visit, there has been an increase in the number of complaints from senior U.S. officials, topped by Secretary of State Condoleezza Rice, about Israel's foot-dragging over the checkpoints, the settler outposts and the building boom across the Green Line. Fayyad persuaded the Americans not to reject his plan to place the border-crossing points between Israel and Gaza under the responsibility of the PA.

"The Quartet, which includes the United States [as well as the EU, Russia and the United Nations], supported my plan back in December, even before the fence at Rafah was toppled," he notes. "It would have created positive dynamics. Everyone said it was a good idea. Yes, even Hamas agreed to adopt the plan." And what was the Israelis' response? "To this day they have not said no, but neither have they said yes."

Fayyad reiterated to Bush what he said last September at the meeting of the steering committee of the donor states in New York. "I said that if you do not allow us to lead an acceptable life, you are wasting your money. I said that without an active and efficient private sector, there is no possibility of creating jobs, and without free movement, the private sector cannot function. I said that the situation in the territories has not changed for the better in recent months, and in some spheres things are even worse. Instead of dismantling checkpoints, Israel has added new ones. The government of Israel has to ask itself whether all these checkpoints are truly needed for security. I suggest that you appoint a committee of experts to determine which checkpoints are essential and which are unnecessary, and we will respect its decision. I will not agree to your removing even one checkpoint that contributes to the security of Israel's citizens. As far as I am concerned, security is a prior condition for proper government, and I am not willing to gamble on it."

Fayyad is in favor of a dialogue with Ismail Haniyeh, the Hamas leader in the Gaza Strip, without the prior condition that he recognize Israel or promise to honor the agreements signed by the Palestine Liberation Organization. The only condition he sets for Hamas is to disarm the militias and to accept fully the PA's authority. In other words, "recognition of the PA as the daddy of everyone." At the same time, he does not hide his concern at the rise of Hamas, as reflected in the recent public opinion survey conducted by Dr. Khalil Shikaki. (The findings: For the first time, Haniyeh and his government are more popular among the residents of the territories than Abu Mazen and the Fayyad government.)

"The past few months have not been auspicious for us," Fayyad says. "People cannot eat transparency or drink security. These things have got to be translated into a change for the better in day-to-day life. It is all very nice to see policemen in well-pressed uniforms, but what is all that worth if I cannot send my child to school? In Gaza the situation is 10 times worse. People there do not have food to give their children. If I cannot guarantee minimal health services to my citizens, what happens to my government is not so important to me."

You said you had a wonderful day, but a major item on newscasts concerns 3,000 cellular phones that were seized in the car of an adviser to Abu Mazen. That does not attest to good government.

Fayyad: "That is truly a devastating case of smuggling. I assure you that he will be interrogated thoroughly and that the guilty parties will be punished severely, irrespective of their status. But such things can happen in any country. What I find important is that we have made tremendous progress with regard to proper government and transparency. In the coming days, the Finance Ministry will launch an Internet site, and I promise you that on the 15th of every month it will publish a detailed report of revenues and expenditures. I also promise that there is no breach today through which PA money can be passed without a full report. Despite all the obstacles and barriers, we are determined to build a thriving state, as you, the Israelis, did 60 years ago.

"Because of the restrictions on movement," he continues, "we are unable to advance large-scale projects. Instead, we are using the donors' funds to develop small local services, such as schools, hospitals and clinics. When the donors met met last December in Paris, there were 150 projects under way; now there are 320. In May, the PA will hold a business conference with the participation of entrepreneurs and economic experts from around the world, including Israel. Even if the conference does not generate new investments, it will contribute to changing the atmosphere. I want every Palestinian to be able to look in the mirror and be proud of his country. You have no idea what the occupation did to people's self-confidence. My key challenge is to restore their belief in their own capability."

And you believe this can be done in conditions of violence and occupation?

"The end of the occupation and building a state are urgent tasks for me. That is my religion. I am in favor of a complete cessation of violence by both sides, and not only a temporary cease-fire. We signed a commitment to stop the violence, and we must abide by it. I am vehemently against the rocket attacks on Israel, but that does not justify the disproportionate use of force against civilians in Gaza. You say that if the Palestinians behave more nicely they will gain from it, like a Pavlovian reflex. I find it difficult to understand how that squares with the fact that a million and a half residents of Gaza have become people with nothing to lose. How does that contribute to Israel's security?"

Defense Minister Ehud Barak claims that after the Fatah debacle in Gaza and the rocket attacks on the Negev, it would be irresponsible to remove the Israel Defense Forces from the West Bank.

"We failed in Gaza last June because the situation there was chaotic. Today the situation in the West Bank is a lot safer, and I also hear that from my Israeli interlocutors. Your security experts also agree that the security situation in Nablus has changed radically since we sent large forces into the city. That is happening even though Israel destroyed our infrastructures when the army entered Area A in 2002 [during Operation Defensive Shield] and forgot to leave, as is obligated under the agreement between us. To build takes far more time than to destroy.

"The approach that Israel must stay in the territories if it is to protect its security will lead to our never arriving at security capability. How can I be responsible for security when every other day an Israeli army jeep blocks a street in the heart of Ramallah and checks the passersby, or when the army decides to raid money changers? Are money changers ticking bombs? The next day they opened their businesses anew. If you have a problem with illegal activity, why don't you come to us? I myself have made decisions more morally difficult than closing down money changers. I slashed 40,000 jobs and brought about the closure of charity organizations that operated contrary to the law. Operations like that, raids in Jenin, undermine our credibility and capability. After Israeli soldiers beat up Palestinian policemen in Bethlehem, how are our people supposed to stand on their legs?"

Maybe salvation will come from the negotiations on a final settlement between Tzipi Livni and [Palestinian negotiator] Ahmed Qureia?

"Regrettably, progress is not being made there at the pace required to bring about the result that was declared as a goal at Annapolis. There are also measures that cause us to regress, such as the continued building in the settlements and, no less serious, declarations of new construction. Let us say for a moment that we are not doing everything the [U.S.] road map requires in the security realm. Does that mean Israel is entitled to violate its commitments regarding the freeze on settlements and the evacuation of the settler outposts? Maybe you can explain to me how that is consistent with the repeated statements by your leaders that a Palestinian state is an Israeli interest. Why are you acting against your own interest?"