Palestinian economy faces collapse

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By Steven Erlanger, Jerusalem
March 17, 2006

THE Palestinian economy would be thrown into a deep depression, with incomes dropping by nearly 30 per cent, if Israel withholds revenues from a Hamas-led Palestinian Authority and donor countries cut aid, according to a World Bank study.

The Palestinian economy would shrink by 27 per cent in 2006 — a one-year contraction comparable to the Depression in the United States. Unemployment would nearly double and two-thirds of the population would be living below poverty level.

The study, sent to donor countries on Wednesday, was sought to help guide their policies after Hamas' election victory on January 25.

The figures illustrate the policy dilemma of the United States and the European Union, which do not want to provide money to Hamas but also do not want to punish ordinary Palestinians for a democratic vote.

In Washington on Wednesday, James Wolfensohn, the Quartet's special Middle East envoy, warned that cutting off aid to the Palestinian Authority would lead to chaos and "increased radicalisation of Palestinian society".

http://www.theage.com.au/news/world/palestinian-economy-faces-collapse/2006/03/16/1142098600512.html