fayyad - AP - February 20 2011
Palestinian Prime Minister Salam Fayyad speaks at the northern West Bank village of Al-Jalameh ealier this year. Photo by AP
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The Palestinian Authority said on Monday it had not been able to pay salaries for the first time since 2007 because of Israel's decision to halt the transfer of funds it collects on its behalf.

Palestinian Prime Minister Salam Fayyad said Israel's decision, a move driven by Israeli concern over a Palestinian unity deal including Hamas, had put the Ramallah-based government in a "very difficult" financial position.

Fayyad said the PA had paid salaries to its 150,000 employees promptly on the 5th day of every month since mid-2007. "We are now on the 9th and we have not been able to meet this obligation," he said.

Israel recently blocked the transfer of 105 million dollars in customs duties and other levies it collects on behalf of the Palestinian Authority, following a deal to reunite the two rival Palestinian groups Hamas and Fatah.

Palestinians see reconciliation between the secular Fatah and Islamist Hamas as crucial for their drive for an independent state in Gaza and the West Bank. The two groups had been at odds since a brief civil war in 2007, after which Hamas seized control in Gaza, and Fatah was left to administer the West Bank.

Israel has condemned the unity pact as a "tremendous blow to peace", with Netanyahu refusing to negotiate with Hamas, whose charter calls for Israel's destruction.