Note No 124
19 February 2001


NEW YORK, 16 February (UN Headquarters) -- The Palestinian Authority will, within just a few weeks, not be able to pay its salaries, which might cause the collapse of key Palestinian institutions and lead to chaos and anarchy, Terje Roed-Larsen, United Nations Coordinator for the Middle East Peace Process and the Secretary-General’s Personal Representative to the Palestine Liberation Organization and the Palestinian Authority told correspondents this afternoon during the noon briefing.

The Authority needed donor money from Europe, he continued. So far, the Government of Norway had pledged $10 million. With the European Commission he had discussed the possibility of a transfer of 60 million euros in budgetary support. The Government of Israel controlled $54 million in arrears which it had collected in Value-Added Tax (VAT) taxes on behalf of the Palestinian Authority. All that money was needed to get the Authority through the months of February and March. It was also necessary to "reorient" Arab pledges of $1 billion towards budgetary support in order to carry the Palestinian Authority through the rest of the year.

This fiscal crisis was one of several acute inter-linked crises in the Palestinian areas and in Palestinian/Israeli relations, he said. There was also an economic and social crisis. In the West Bank and Gaza, the unemployment rate was 38 per cent and, on average, 30 per cent of the population there were living under the poverty level (people earning less than $2.10 a day). That crisis was leading to a crisis of attitude on both the Palestinian and Israeli side. Only a minority of the Palestinian population now believed that negotiations could lead to a just peace. This contrasted with the situation before October last year, when about 70 per cent of the population supported the peace process.

Finally, there was a security crisis. There was a growing support for extremist organizations and violence was rampant. Both parties had been informed that a fiscal collapse, followed by an institutional collapse of the Palestinian Authority, would lead to further violence and a situation that could get out of control. The security situation, the political issues and the economic and social situation had to be addressed simultaneously.

This morning, a road-side bomb attack in the Shaba Farms area, for which Hezbollah had claimed responsibility, had killed one Israeli soldier and injured two. The following artillery attacks and counter-attacks did not result in any injuries or loss of life on the Lebanese side of the border. The "Blue Line" border put the area on Syrian territory. He was concerned that the incident took place during a time of extreme volatility in the Palestinian areas.

In answer to a correspondent’s question he said the position of the United Nations had been that Lebanon should deploy its army in the South since Israel’s withdrawal from the area. That had not happened to a satisfactory degree.

To a question whether destroying Palestinian homes by Israel was a violation of the Geneva Convention, he said it was clear that there were violations of conventions and international law in the conflict between the Palestinians and the Israelis. But he now gave top priority to economic issues because key Palestinian institutions might crumble in the near future, which might lead to the end of the Palestinian Authority. Any government that could not pay salaries to its employees would crumble in a very short time. There was already the situation in certain parts of the West Bank and Gaza, where violence was rampant, and he felt the Palestinian authority was not fully in control.

The Secretary-General and Mr. Roed-Larsen had told Prime Minister-elect Sharon and Prime Minister Barak that the Israeli border closing policy was counterproductive to the security interest of Israel. They had also pressed upon them that, in order to secure the survival of the Palestinian Authority -- which was also in the security interest of Israel -- they had to transfer the arrears. The losses to the Palestinian economy because of various policies amounted to some $8.6 million a day. The Israeli Government had agreed to transfer 140 million shekels of its arrears immediately, depending on the security situation. That had, however, been agreed on the day before the tragic bus incident took place.

On Tuesday he would meet in Washington with Mr. Armitage, United States Deputy Secretary of State, and key people in the United States State Department and National Security Council, to discuss all issues relevant to the Middle East peace process.

The revenues of the Palestinian Authority was shrinking, and $50 million monthly was needed to keep it afloat in the near future, he said in answer to a correspondent’s question. The situation could change if the closures were lifted. Before the current crisis, the Palestinian budget had been more or less balanced and unemployment had been down to 10 to 12 per cent. The need for donor money was a product of the current political crisis.

Asked if the United Nations had made attempts to get in touch with "extremists", he said that contacts were predominantly with Israel and the Palestinian authorities, but that there were also attempts to have dialogue with major organizations and factions on both sides. Staffan de Mistura, the Secretary-General’s Personal Representative in Southern Lebanon, had recently met with a Hezbollah leader.

He could not say if Mr. Sharon would like to see the collapse of the Palestinian Authority, as he could not look into his mind, he said in response to another question, but a collapse of the Palestinian Authority was in his opinion counterproductive to any interest in the region, including Israel’s interest.

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