Palestinian Authority in economic crisis

At the beginning of September protests against the high cost of living and the rising prices of fuel and basic food items swept across the West Bank. The protests were directed against the economic policies of the Palestinian Authority (PA) and in particular of the Prime Minister, Salam Fayyad, and his subservience to the dictates of Israel. Fayyad is a former IMF economist and has been an enthusiastic supporter of the strategy put forward by Tony Blair and the Quartet of security cooperation with Israel and the cutting of public expenditure, under the guise of Palestinian state building. Fayyad had announced an increase in the level of VAT to 16% and an increase in the cost of fuel to the equivalent of over $2 a litre, while employees of the PA had still not received their salaries for August. This came on top of an inflation rate of 3.5% for 2011 which included a massive rise of 18% in electricity prices. On 4 September protests erupted in Ramallah, Hebron, Bethlehem, Nablus, Jenin and other cities.


Thousands of people participated in the demonstrations; burning tyres were placed on roads in Hebron and an effigy of Fayyad was set on fire. One of the demands of the protesters was the ending of what is known as the Paris Protocol. This is an integral part of the Oslo Accords which ties and subordinates the Palestinian economy to the interests of Israel. Under the Paris Protocol, for instance, the difference between VAT levels in Israel and Palestine is set at a maximum of 2%. As wages and the standard of living are higher in Israel, this linkage can only have the effect of worsening living conditions for Palestinians. As the protests escalated with the demonstrators taking on the PA security forces in Hebron and Nablus and with strikes of public sector workers taking place, Fayyad and the PA were forced to backtrack. On Tuesday 11 September they announced a reversal of the price and VAT increases with VAT being pegged at 15%. On the same day Israel announced that it would advance $63m of tax payments to the PA to help it through the crisis it faced. Netanyahu declared that it was ‘in our joint interest’ that the PA overcomes its financial crisis. Most PA employees were paid half their August salaries at the beginning of September with the other half being paid out on 17 September.

The PA depends almost entirely on financial assistance from donor states, in particular the EU, US and certain Gulf States. Its tax revenues are collected by Israel and are either passed on or delayed depending on the political whims of Israel at that particular time. Whether PA employees receive their salaries on time at the end of September depends entirely on the speed of delivery of aid money from these donor states.

A report on the economy of Palestine by the United Nations Conference on Trade and Development (UNCTAD) released on 5 September describes how Israel uses the tax revenue it collects on behalf of the PA for its own political ends: ‘A key source of the PA’s fiscal instability is the channeling through Israel of Palestinian trade clearance revenue, which Israel collects on behalf of the PA as stipulated by the Paris Protocol. In May and November 2011, Israel withheld Palestinian revenue to further its political goals, as it did in 2002 and 2006.’

The report details some of the realities of the Palestinian economy and the deteriorating living conditions for the majority of Palestinians. The unemployment rate in Gaza is 33%; in East Jerusalem it rises to 40% for men and 85% for women. Poverty rates in East Jerusalem stand at 78%, which is higher than Gaza where 52% of households are deemed to be food insecure. Across Palestine 33% of all households are deemed to be food insecure with another 33% vulnerable or only marginally food secure. Wages are now on average worth 8.4% less than they were in 2006, the decline more pronounced in the West Bank. The report documents the destruction caused to the agricultural and fishing industries by the Israeli occupation in denying access to the land and to water and by restricting access to markets to buy and sell products. A graphic example is the decimation of the fishing industry in Gaza, where the number of fishermen has declined in number by 66% since 2000.

The report concludes that: ‘Prolonged occupation, and the socio-economic impact of confrontation with an expanding settler/colonial-type enterprise, is the main cause of the failure of Palestinian economic development efforts. Ending settlement and occupation is the sine qua non for sustainable development to take root. In the absence of a dramatic shift in the economic and political balance of power between the Israeli occupation and the Palestinian people, genuine economic recovery in the occupied Palestinian territories will remain elusive.’

This conclusion is also an indictment of Abbas, Fayyad and the PA; they represent the interests of a small layer of Palestinian capitalists whose privileged life styles depend on their continuing collaboration with the Israeli occupation forces and imperialism. Any successful struggle by the thousands of Palestinians who came out onto the streets will mean confronting not just the Israeli occupation but also these pro-imperialist Palestinian forces.

Bob Shepherd

Settler violence in the West Bank and Jerusalem

Incidents of violent racist attacks against Palestinians by settlers and other Israelis continue to rise across the West Bank and Jerusalem. In mid-August three Palestinian youths were attacked and hospitalised in Zion Square in the centre of West Jerusalem by a gang of Jewish youth who, according to witnesses, were looking for ‘Arabs to kill’. At the same time in the West Bank a taxi carrying a Palestinian family was attacked with a petrol bomb by settlers hospitalising all six occupants including the driver and a six-year-old child. At the end of 2011, the UN Office for Coordination of Humanitarian Affairs reported that attacks by settlers against Palestinians were up 32% from 2010 and 144% from 2009. These include attacks against Palestinians that result in injury or death as well as attacks against Palestinian property. So far in 2012 by 11 September there had been 117 recorded attacks.

Fight Racism! Fight Imperialism! 229 October/November 2012


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