Palestinian PM Fayyad says Israel to transfer withheld tax revenues

The Palestinian Prime Minister Salam Fayyad said Monday that Israeli officials told him they have transferred millions of dollars in withheld tax revenues.

Israel held back around $74 million in tax revenues at the end of May that were supposed to be transferred under a long-standing deal between both sides, Palestinian officials said.

The officials said they believed shipment of the money was delayed following Fayyad's lobbying of European nations not to boost their relations with Israel.

The money is aimed toward paying the salaries of around 150,000 Palestinian civil servants.

Fayyad said Israeli officials told him the money had been transferred and would arrive in the coming days.

The issue is sensitive for the moderate Fayyad, who needs to show Palestinians that their struggling economic conditions will improve by engaging Israel.

Israeli officials were not available for comment on Monday due to the Jewish holiday of Shavuot, but a treasury spokeswoman on Sunday said the money was transferred last week.

Palestinian spokesman Riyad Malki said Monday that the delay was a punishment in response to a national stance taken by the government took.

Malki was referring to Fayyad's call on the European Union not to upgrade its relations with Israel, while settlements expand in the West Bank. Palestinians claim the territory for their future state, and Israel is supposed to halt new settlement construction while it negotiates a peace deal.

Fayyad's unusual move upset Israeli Prime Minister Ehud Olmert, who expressed his grave concern over the matter.

Israel has strong trade relations with the EU and is looking for closer cooperation in research and political and economic areas. Israel also is seeking membership in the 30-member OECD, which champions democracy and free market economy.