U.N. asks for record $450M in aid for struggling Palestinians next year

Despite that gloomy assessment, a top minister in the Hamas-led government offered a rare upbeat economic picture, saying increased aid from Arab countries had allowed the government to stay afloat. But independent economists and analysts said the government was still deep in crisis.

The U.N.’s huge aid appeal came as poverty was worsening throughout Gaza and the West Bank. The U.N. will officially launch its appeal Thursday, but The Associated Press obtained an advance copy of the report.

According to the U.N., 65 percent of Palestinians were living in poverty and 29 percent were unemployed. The Palestinian health care system was running out of medicine and on the verge of collapse, and nearly 50 percent of Palestinians did not have reliable access to food.

"Under the current circumstances, poverty levels keep continuing to rise,” said David Shearer, Gaza and West Bank head of the U.N.’s Office for the Coordination of Humanitarian Affairs.

About three-quarters of the $453 million being requested is earmarked for job creation, cash assistance and food aid, Shearer said. The U.N. is also asking for money to support the faltering health and education systems.

Much of the economic damage stems from the international boycott that Israel and Western nations imposed on the Palestinian Authority after the militant Islamic Hamas group won parliamentary elections and took office in March.

The boycott has left the Palestinian government unable to pay full salaries to its 165,000 workers, who make up the backbone of the Palestinian economy.

Israeli limits on exports from the impoverished Gaza Strip and increased restrictions on movement across the West Bank have also damaged the economy, Shearer said.

"Coming on top of the problems with access of movement, (the economic boycott) has had a massive impact on poverty levels within the West Bank and Gaza,” he said, explaining that the 165,000 workers support around 1 million people.

Many had expected the international sanctions to force the government to moderate its views toward Israel. But nine months after taking power, Hamas refuses to accept international demands that it recognize Israel and renounce violence, and negotiations over the formation of a national unity government that could sidestep the sanctions have stalled.

"While humanitarian aid can slow the deterioration, what is really needed is a political settlement to the issue,” Shearer said.

Acting Palestinian Finance Minister Samir Abu Aisha said Wednesday that his government had managed to remain afloat because Arab and European countries increased their donations to the Palestinians — though not necessarily to the Hamas government — to make up for the aid cut.

European countries have stepped up humanitarian aid, channeled through an international fund that bypasses Hamas. Arab countries, meanwhile, have sent hundreds of millions of dollars in aid, in most cases through the office of moderate President Mahmoud Abbas of the Fatah Party.

Abu Aisha said Arab governments had increased their direct payments to the government from $20 million a month before Hamas came to power to $45 million. He said that $60.5 million in cash had been carried into Gaza by Hamas officials returning from Egypt, and the government would continue using this tactic to circumvent the boycott.

Hamas was also optimistic after Prime Minister Ismail Haniyeh received new pledges of aid during his current trip abroad, including a promise from Qatar for $30 million a month to cover the salaries of teachers and some health workers.

Secretary of State Condoleezza Rice questioned Qatar’s Foreign Minister Sheik Hamad bin Jassim bin Jabir al-Thani about the aid package on Wednesday, but the Qatari diplomat said "the salaries will go in the proper channel” and skirt Hamas.

There was no immediate account of the meeting by the State Department. On Tuesday, spokesman Sean McCormack said if the money was used to pay the salaries of Hamas members or was funneled through Hamas, "that would cross a line of the existing international understanding.”

Abu Aisha said the government has managed to give civil servants 59 percent of their back pay. He blamed the financial hardship still afflicting Palestinians not on the international boycott, but on Israel’s seizure of hundreds of millions of dollars in tax revenues.

That sum now equals $550 million, he said at a news conference in the West Bank city of Ramallah, "and could immediately solve the financial crisis if we receive it.”

Miri Eisin, an Israeli spokeswoman, said Israel would be willing to rethink its seizure of the tax funds once the Palestinian government accepts the international demands and releases Cpl. Gilad Shalit, an Israeli soldier captured by Hamas-linked militants in June.

The increased aid has blunted the pressure on Hamas and given the Islamic group some breathing room, said Naser Abdel Karim, an economics professor at Bir Zeit University outside Ramallah.

"(But) we shouldn’t fool ourselves, as Palestinians, that the situation will get better, and then not go ahead with our plan to form a government that will lift the boycott and the siege,” he said.

"Otherwise, we will continue to live like a sick person in an intensive care unit.”