Israel halts funds for Palestinians
(Reuters)
Updated: 2006-02-20 09:00

Israel halted its monthly transfer of millions of dollars to the Palestinian Authority ahead of the formation of a Hamas-led cabinet, a move President Mahmoud Abbas said had plunged the Palestinians into a "financial crisis."

In an apparent nod to international calls to avoid adding to Palestinian hardship, interim Prime Minister Ehud Olmert's cabinet decided against implementing tougher sanctions Israeli defense officials had proposed to try to weaken Hamas.

An Israeli bulldozer demolishes a house during an operation for searching militants at the Balata refugee camp near to the northern West Bank city of Nablus Sunday, Feb. 19 2006. Israeli troops, backed by helicopters and bulldozers, captured a leader of a Fatah-affiliated militant group on Sunday in a military operation in the Balata refugee camp near Nablus. Witnesses identified the man as Ahmed Al Kayzi. [AP]

"Unfortunately, the pressures have begun and the support and the aid started to decrease ... therefore we are currently in a real financial crisis," Abbas told reporters in Gaza, ahead of a meeting this week with Hamas leaders to discuss a unity cabinet.

Israel and the United States have called on other nations to boycott Hamas, which crushed Abbas's long-dominant Fatah faction in a January 25 election, winning 74 parliamentary seats, until it disarms and recognizes the Jewish state and interim peace deals.

The United States, the Jewish state's biggest ally, has asked the Palestinian Authority to return $50 million of its own aid to ensure it does not reach Hamas. The Islamic group is sworn to Israel's destruction.

Israeli Defense Ministry officials last week recommended stopping all tax revenue transfers and proposed barring all Palestinians from working in Israel and from traveling between Gaza and the West Bank across Israeli territory.

On Sunday, the cabinet announced a permanent halt to the monthly transfer of about $50 million in tax revenues Israel collects on behalf of the Palestinian Authority each month.

Olmert told his cabinet Israel "had no intention to harm the humanitarian interests of the Palestinian population," his office said in a statement.

The Jewish state says it will not negotiate with a Hamas-led government, but would not cut off ties with Abbas.

Opinion polls put Olmert's centrist Kadima party on course to win Israel's March 28 election on a platform of disengaging from the Palestinians.

In fresh violence, Israeli forces shot dead two Palestinians in Balata refugee camp in the West Bank during a stone-throwing confrontation while an air strike in Gaza killed two Palestinian militants who the army said had been planting a bomb.