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Palestinians move to ban Israeli goods in the West Bank following tax freeze

A Palestinian man reads posters calling people to boycott Israeli products following the latest war between Hamas militants in the Gaza Strip on August 12, 2014
Ahmad Gharabli (AFP/File)
The UN envoy warned that the Israeli cuts could contribute to a serious destabilization in the West Bank

Palestinians on Thursday announced a series of measures, including the prevention of Israeli goods into the West Bank in response to the Israeli decision to withhold $140 million in funds to the Palestinian Authority over so-called “terror salaries.”

Palestinian Authority President Mahmoud Abbas’ deputy called on Palestinians to take action “to confront the Israeli decision to freeze funds on the ground” including to prevent the entry of Israeli goods into the West Bank and to “reexamine continued economic and security cooperation.”

At the same time, the Palestinian finance minister announced Thursday salary cuts for civil servants.

The PA, which is already running a deficit, will "pay the salaries of civil servants in time, but they will be reduced", said PA finance minister Shukri Bishara after a meeting with EU representatives in Ramallah.

The cuts will not apply to salaries "paid to pensioners and families of martyrs, wounded or prisoners", he added, adding that wages below 2,000 shekels ($550) would also not be affected. 

Israel's security council earlier this week approved a multi-million dollar freeze on funds transferred to the Palestinian Authority (PA) in a bid to offset terrorist's salaries, after months of bureaucratic wrangling culminated in the government's sizable slash to the West Bank-based body.

The tax revenue cut amounts to approximately $138 million, (over NIS 500 million) and according to media reports will likely be deducted incrementally over a 12-month period.

The deduction is deemed to be relative to the said amount that the PA allocates for stipends given to Palestinian prisoners in Israeli custody as well as the families of the convicted terrorists.

Nikolay Mladenov, the United Nations envoy to the Middle East, warned the Security Council in a report Wednesday that the Israeli decision could further destabilize the situation in the West Bank that could lead to a security breakdown.

"Recent developments in the region endanger the economic stability of the Palestinian Authority and consequently Israel's security," Mladenov said in his monthly report, adding that both the security and humanitarian crisis in the Palestinian territories continues to worsen amidst the Israeli funding cuts.

Palestinians immediately slammed the move, warning for months prior that there would be a response if Israel went through with the deductions.(AFP/MENAHEM KAHANA/ABBAS MOMANI)

The recently resigned Palestinian Prime Minister Rami Hamdallah said the move amounted to a "theft of Palestinian public money" and showed "Israel's enactment of racist laws in support of the occupation" which "undermined the two-state solution.”

On Wednesday, Palestinian Authority President Mahmoud Abbas lashed the Israeli move and said his government would refuse to accept all tax funds from Israel in response.

Israel views the Palestinian government’s refusal to end the payments as evidence of its continued support for terrorism against the Jewish state. Whilst, the PA repeatedly reaffirms that the payments are a form of welfare to the families who have lost their main breadwinner and denies it seeks to encourage violence.

However the pressure goes both ways, as the security nexus at the heart of the calcified conflict between Israel and the Palestinians means it is in Israel's interest for the PA to continue to keep the peace in the territories under its control.

Individuals in Israel’s security establishment have warned that the cuts to the PA’s budget could further destabilize the West Bank triggering new terror attacks against Israelis.

At the same time the Palestinian reaction to the decision signaled that former collaboration would take a hit.

Max Nash / AP Photo

The Palestinian economy is dysfunctional and severely handicapped due to security blockades and underdevelopment. Despite registering stable growth, the situation in the West Bank is close to catastrophic, with soaring unemployment and little prospects for structural development.

It is even worse in the Gaza Strip, where 2 million people live in an enclave with very little opportunities for economic activity, and minimal trade links.

It has come under further strain in the last year, as a diplomatic breakdown with the US has led to the disengagement of one of the Palestinians' largest aid donors.

Last week President Donald Trump's administration officially ended its financial support for Palestinian security services.

Israel collects funds from imports into the West Bank and Gaza, and other taxes, and forwards a large part of it to the PA, after deducting some payments for water and electricity. This constitutes the largest part of the Palestinian government's budget.

This is part of the Paris agreement, a set of rules signed in 1994, which were meant to be temporary but remained in place ever since. The Palestinians set out to convince parties to renegotiate these agreements in December last year, and sources confirmed that the Israeli government was opened to the idea 'in principle,' according to Israeli financial paper Globes

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