The Palestinian Authority Money Trail

The question of how the perennially profligate Palestinian Authority is going to keep its head above water with Hamas now at the helm looms large in light of the fact that foreign donors are chary of bankrolling the radical group and some already have been withholding money because of repeatedly missed fiscal targets.

(Hamas for its part wants it both ways: It will welcome continuing aid for the PA but won't recognize Israel.)

The Council of Foreign Relations says this about the sources of the PA's funding:

A combination of overseas assistance and tax collection. . . . taxes — from businesses in the territories, as well as a customs tax collected by Israel and then paid to the Palestinians — account for about 40 percent of the PA budget. Donations from abroad make up the rest. The PA has run into budget trouble lately, running a massive deficit and sparking the wrath of European donors by adding thousands of people to the security service instead of cutting costs. Experts say Fatah padded its payroll with young militants to win their votes ahead of the polls, and expect the PA will be unable to pay all their salaries after the elections. Since November 2005, the European Union has withheld $42 million in aid payments to the PA as punishment for missed fiscal targets.

Also interesting is who is providing overseas assistance and how much.

The Belmont Club, citing American Future via the Times of London, offers this breakdown:

A total of $1.06 billion, of which a whopping $368 million comes from the U.S.

Other donors include theEU ($338 million), Britain ($43 million), Italy ($40 million), Sweden ($32 million), Germany ($27 million) and Spain ($17 million).

The Belmont Club's Wretchard offers this perspective:

The relationship between the West and the Palestinian proto-state has been unnatural in that it paid or supplied most of the services that the Palestinian state ought to have provided in the first place. This not only contributed to corruption but relieved the Palestinian political parties of the burden of good governance. It was never necessary to collect garbage or build roads and the political parties were free, like teenagers supported by indulgent parents, to leave their rooms dirty while they raised hell.

Now some will argue that the Palestinian Authority was in no position to do this due to Israeli occupation. But now that they've got some territory and a government that excuse will be thin.

More is expected of America than to "do business" with the PA in the same way it does with other countries. It will not be enough to desist from invasion and to observe international usages. What is expected is to keep paying their bills.

I think the implicit expectation will be to keep the money -- a.k.a. the peace process -- flowing to Hamas. Failure to do this will be described as "punishing the Palestinians" for exercising their democratic rights. But where is it written that one country must underwrite another?

Meanwhile, the New York Times reports today that many Israelis see a silver lining of a sort in the Hamas vistory.