OCCUPIED JERUSALEM, March 16, 2006 (IslamOnline.net & News Agencies) – A new World Bank report warned on Thursday, March 16, that cutting aid to the future Hamas-led Palestinian government would push the West Bank and Gaza Strip into deep economic depression and double the unemployment rate by 2008.

The report, sent to donor nations weighing an aid cut-off, said that personal incomes among Palestinians could decline by as much as 30 percent this year, reported Reuters.

The percentage of those below the poverty level would jump from 44 percent to record 74 percent, it said.

The unemployment rate in Palestinian territories would also increase from some 23.4 percent in 2005 to as high as 47 percent in 2008.

The US and the EU have threatened to cut off aid to the Palestinian Authority once a Hamas-led government is in place.

Israel has frozen the monthly transfers of tax revenues it collects on behalf of the PA, worth around $50 million.

International Middle East envoy James Wolfensohn has warned that the PA, which is dependent on foreign aid, risks a financial collapse within two weeks.

Essential Operations

The World Bank report said Israel's decision to withhold tax revenues could make it nearly impossible for the PA to maintain "essential government operations."

The PA was two weeks late paying February salaries to an estimated 140,000 workers and security personnel, in large part because Israel kept back the tax funds.

The Palestinian Finance Ministry said on Wednesday, March 15, it does not know where it will get the money for the next payroll, due early next month.

As many as one in four Palestinians is dependent on wages from the PA.

The report predicts that support for the PA's budget could drop from $350 million in 2005 to $300 million in 2006 if Israel continued to withhold tax revenues while tightening restrictions on Palestinian trade and on the number of permits given to Palestinian laborers.

In 2007 and 2008, budget support for the PA could drop to $200 million.

In a report issued on March 7, the US Agency for International Development (USAID) said Israel's closure of Karni crossing, the Gaza Strip's main commercial crossing, has caused steep financial losses and risks an agricultural catastrophe in the impoverished area.

This came as senior officials of the international "Quartet" of Mideast mediators met Thursday in Brussels to discuss how to deal with Hamas.

"They will focus on relations with Palestinians and how to continue support," said one diplomat ahead of the talks.

The Quartet – which incorporates the United States, the European Union, the United Nations and Russia – has threatened to cut aid unless Hamas recognizes Israel, disarms and accepts interim peace accords.

A proposal being discussed by Israel and donor nations would channel most future international aid to the Palestinians through the World Bank or another international organization.

US officials have rebuffed a European proposal to transfer that money directly through the office of Palestinian President Mahmoud Abbas.

Wolfensohn has threatened to resign saying the mandate and backing he had were unclear after Hamas's landslide poll win in January.

He said the Quartet was undecided on issues such as how to channel funds to meet Palestinian humanitarian needs while bypassing Hamas.

Former US president Jimmy Carter has cautioned the United States and Israel against punishing the Palestinian people for electing Hamas.