With the end of the EU-run Temporary International Mechanism looming, Palestinians are scrambling to find ways to keep the money flowing, reports Erica Silverman The EU Temporary International Mechanism (TIM) has become Gaza's lifeline, its sole supplier of fuel, medical supplies and the allowances that are the only source of income for many Palestinians. Funds are channelled directly to the president's office, bypassing the PA. But the TIM's three-month mandate expires this month and while Palestinians hope it will be extended by the Quartet who meet this week in New York, as it stands the EU can provide assistance only for another four weeks. "All the requirements of the Quartet (the EU, the United States, the United Nations and Russia) are in this agreement and from our point of view that should be enough," said presidential spokesperson Nabil Abu Rudeineh on Sunday, ahead of his meetings, alongside President Mahmoud Abbas, with US President George Bush on Wednesday and US Secretary of State Condoleezza Rice on Monday. Washington's position, though, is unlikely to change. They insist Hamas formally recognise Israel, renounce violence and respect all previous agreements reached between parties to the Israeli-Palestinian conflict. US approval is essential if international sanctions against the Hamas-led government that have decimated the Palestinian economy -- which continues to reel under Israel's decision to withhold monthly tax revenues in violation of the Paris Protocol -- are to be lifted. "Two-thirds of the [new] government will not be from Hamas, this is a Palestinian unity government, not a Hamas government," said Abu Rudeineh. Abbas's administration and the Hamas-led government say the government will honour agreements signed by the Palestine Liberation Organisation (PLO). It also says the government will assist the president in formulating a peace plan based on the Arab peace initiative adopted by the Arab League in 2002 and other relevant international initiatives. "We will not mention the recognition of Israel, but we have sent positive signals, enough for the world to understand that this government is not against negotiations and talks [with Israel] through the PLO," said Hamas government spokesperson Ghazi Hamad. The US Treasury Department banned all financial transactions with the PA after Hamas took office. The PA has been unable to receive funds and emergency assistance from abroad for six months now and domestic revenues have ground to a halt. Local, regional and international banks, fearful of anti-terrorism sanctions and lawsuits filed in US courts, have refused to deal with the PA, creating a liquidity crisis and leading the Arab Bank to close the PA's treasury account. The resulting political and economic isolation has left the Palestinian government and its people destitute, and totally dependent on the EU's TIM. "Window one" of the mechanism provides non- salary operating costs to the PA ministries of health, education and social affairs from an existing World Bank trust fund, with the bulk of the $50-60 million budget going to healthcare. It is far from adequate, leaving the World Health Organisation (WHO) and other NGOs struggling to bridge the gap. "One fourth of essential drugs are out of stock," says WHO health officer Sylvia Pivetta. Half the primary care centres lack generators, essential to health service provision since Israel destroyed Gaza's only power station on 28 June, leaving residents, businesses and hospitals without electricity or water. "Since the end of June the lack of electricity has become the main problem impacting the health sector in Gaza," says Pivetta. "Window two" is an extension of the programme instituted by the EU Commission at the beginning of 2006 to provide fuel to the Gaza Power Company after Israeli provider Dor Alon threatened to end deliveries die to unpaid bills. After Gaza's power station was destroyed the budget of about $50 million was diverted towards providing fuel for generators across the Gaza Strip. Between 200,000 and 300,000 litres of fuel are distributed to more than 200 delivery points in Gaza every week in a programme overseen by Price Waterhouse Cooper. This powers hospitals, banks, water and sanitation systems. Currently there is less than two weeks supply of fuel in reserve, leaving Palestinians in constant fear that Israel will once again cut their supply- lines. "Window three" of the mechanism provides social allowances to healthcare workers, low income civil servants and those receiving social welfare, including pensioners. Just over $100,000 Palestinians have benefited from the budget of $60 million which is now almost entirely spent. According to the Palestinian Monetary Authority (PMA) these partial salary payments been just enough to keep banks in the West Bank and Gaza, which made loans against the security of government salaries, afloat. Banks have been able to reschedule the loans and have received some payments, automatically deducted from clients accounts whenever direct deposits have been made by the EU and the president's office. In alleviating Gaza's financial plight there is only a least worst, rather than a best, case scenario. Despite EU approval only the US can lift economic sanctions, and this is unlikely with the Quartet so divided. Israel, too, holds important cards. It has the ability to immediately inject money into the public sector by releasing withheld PA tax revenues estimated at $ 450 million, which would allow the PA to pay salaries. Israel could also open borders to allow imports and exports to enter and leave the Palestinian Territories. Yet even if sanctions are lifted today the Palestinian economy has suffered long-term damage, and the political system has been pushed yet further away from statehood.
