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Richest Palestinians Stump Up Millions to Bail Out Government

Richest Palestinians Stump Up Millions to Bail Out Government

(Bloomberg) -- Wealthy Palestinian businessmen are offering President Mahmoud Abbas’s West Bank-based government tens of millions of dollars in emergency loans after a standoff over payments to Palestinians involved in attacks on Israelis pushed its finances to the brink of collapse.

Israel announced in February it would withhold about $11 million worth of tax revenues a month, about 5% of the amount it collects on behalf of the Palestinian Authority, offsetting stipends paid to families of Palestinians killed by Israelis or held in Israel on security-related charges.

Since the deductions began, the Palestinian Authority has refused to accept any tax money at all, saying Israel has no right to withhold the cash or decide how it is spent.

Munib R. Masri, one of the richest men in the West Bank, has mobilized two dozen peers to lend the Palestinian Authority money in the interim. The private sector can marshal as much as $210 million over the next three months, he said at a meeting in Ramallah to discuss how to structure support.

“The private sector has a duty and a responsibility and is a partner at such times,” Masri said.

Bridging Loan

With taxes comprising nearly two-thirds of the Palestinian Authority budget, the United Nations warned last month that the impasse could lead the government to run out of money by summer. The Arab League pledged to provide $100 million per month to cover any shortfall, but little of that money has arrived.

Azzam al-Ahmad, a senior official from the governing Fatah faction, said Abbas had accepted Masri’s proposal for bridge loans.

“The Palestinian Authority will not collapse in July as everyone is saying,” said al-Ahmad, who also attended the consultations. Abbas “gave his guarantees that once the tax money Israel is holding is released, he can pay them back.”

The issue is an emotive one for both sides. Israel contends the allowances reward and encourage terrorist attacks. Palestinians say they are a form of social security for families that have lost a breadwinner in the struggle for statehood.

Some 13,000 families receive such stipends and Abbas has been willing to halve civil servant salaries as income dried up rather than cut the allowances, which range from $390 per month for a three-year sentence to $3,330 per month -- nearly triple the minimum wage -- for families of prisoners serving 30 years or more, according to a group representing Palestinian prisoners.

Potential Collapse

In Israel, opinions are split over the depth of the crisis. Defense officials warn the Palestinian Authority’s collapse would create a security nightmare in the West Bank. Others note Palestinian officials have threatened to dissolve their government before, figuring Israel will ultimately compromise rather than take over responsibility for West Bank residents.

Israeli Foreign Ministry spokesman Emmanuel Nahshon said the government had asked the international community to ensure money they give the Palestinians is not spent on such allowances.

Congress last year stopped funding the Palestinian Authority to pressure it to halt the payments. Earlier this month, the European Union proposed a social-security system that would pay prisoners based on need rather than length of sentence, but the Palestinian Authority rejected the idea.

To contact the reporters on this story: Fadwa Hodali in Ramallah at fhodali@bloomberg.net;Michael S. Arnold in Tel Aviv at marnold48@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, ;Riad Hamade at rhamade@bloomberg.net, Amy Teibel

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