If Israel continues to oppose the Hamas-Fatah reconciliation and block Palestinian tax and custom revenues, it will lead to the Wests greatest nightmare: the collapse of the Palestinian Authority. Withholding Palestinian income from clearance revenues (which comprise a significant part of the PAs monthly income) and encouraging key donor countries to freeze their billion dollars in annual assistance will create a financial and service crisis like that of 2006-07 – only this time the PA may not survive. That is because for the last four years the caretaker PA, in defiance of basic democratic norms, has been led by Salam Fayyad, an unelected prime minister appointed and approved by Mahmoud Abbas, a president whose term has expired and who rules by decree due to a defunct legislative council.
Today, in the West Bank, the PAs sole source of political legitimacy comes from the money it disburses most of which comes from the same sources Israel wants blocked. This money pays for such basic services as education and health care, infrastructure like water systems, sewerage and roads, and the operation of ministries. More important, it pays the salaries of about 150,000 PA employees who in turn support at least half a million additional Palestinians.
Todays unelected PA has no political and economic future without these moneys. Even the World Bank, one of its largest supporters, recently forecast bleak prospects for economic growth, noting that foreign aid is what keeps many Palestinians above the poverty line and that the current economic recovery is still mainly confined to the non-tradable sector and is primarily donor-driven.
After 2006, when Hamas won the Palestinian elections, Israel withheld approximately $1 billion in VAT funds for almost one and a half years until the formal split with Fatah in June 2007. Like today, those revenues constituted a critical two-thirds of the PAs monthly income. When it was withheld, salaries were not paid, basic services stopped functioning, infrastructure deteriorated and public employees went on strike. The PA was on the brink of a breakdown.
And just as they did this week, in 2006 it was several EU states that stepped in to pay PA salaries. The EU formed the Temporary International Mechanism to compensate for the Quartets political and financial boycott of the Hamas government and Israels withholding the clearance revenues. Through the TIM, the EU provided around $1 billion in assistance to cover more than 77,000 salaries, operating costs in the health, education and social services, and purchase of fuel for Gazan hospitals and utilities.
While Palestinians certainly benefited from this huge outlay of European cash, it was Israels obligation, as the occupying power, to provide it. Today, however, it is unclear whether the EU will have the legal and political will or the funds to repeat such a considerable emergency operation, especially when attention has shifted to supporting emerging democracies elsewhere in the Arab world.
Money aside, a PA crisis and/or collapse resulting from a boycott of the new Hamas-Fatah government could ultimately lead to further violence and chaos. This is what happened when the first Hamas-Fatah national unity government, formed under the Mecca Agreement in 2007, failed, after the decision by all the Quartets members but Russia to boycott and isolate it.
The formation of the NUG was a critical event an attempt to unify and strengthen the Palestinians, and a necessary condition for resumption of successful negotiations with Israel. The NUG was effectively a concession by Hamas, an agreement to share its rightfully gained elected power, and to delegate negotiating authority to Abu Mazen almost identical to the concessions it made today. International recognition of the NUG could have been a show of support for those political concessions. The violence that followed its breakdown should have surprised no one.
The recurrence today of a similar situation presents Israel and the international community with an opportunity to rethink past mistakes and recognize new realities. Internally, the PAs political legitimacy is more in doubt. And the plan to undermine Hamas by boycotts and sieges has failed. Hamas still exists, and even Abu Mazen and his Fatah cadres recognize this. Moreover, there are few Arab leaders left to support or even tacitly encourage boycotts of Palestinian reconciliation. This current effort was led by Egypts new regime, which needs it to succeed to prove itself. And for Israel, its new reality especially following continued settlement policies and the war in Gaza is the slow erosion of the fail-safe Western political support it relied on back in 2006-2007.
Recognizing the Hamas-Fatah reconciliation does not have to mean recognizing or accepting Hamas agenda. The reconciliation document makes this quite clear leaving it to the Palestine Liberation Organization to negotiate the political issues, including a peace agreement with Israel. Indeed, support for the Hamas-Fatah accord is more about an investment in the Palestinian people, respecting their will and their goal of self-determination.
It is also the best chance to facilitate elections and replace this caretaker government with a genuinely democratic regime in the occupied territories. Aid and the clearance revenues are critical for this process, and for ensuring the provision of essential services to the Palestinians. There are many creative ways to ensure that these moneys are used to achieve these goals.
At the same time, reconciliation is an investment in a stronger Palestinian negotiating body that has the requisite support to forge a political agreement with Israel. And that is probably the surest way to reduce and prevent further hostilities, while providing some hope amidst the deep frustration reigning today among Palestinians.
Allegra Pacheco is an attorney who worked with the UNs humanitarian office in the occupied territories between 2003 and 2010.
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