Hamas proposes job cuts to avert financial collapse

Wed May 31, 2:27 PM ET

RAMALLAH, West Bank (Reuters) - Palestinian Finance Minister Omar Abdel-Razeq proposed on Wednesday cutting thousands of government workers and selling off government investment assets in a bid to avert financial collapse.

Abdel-Razeq told the Palestinian parliament that Western aid cuts, Israel's refusal to release tax revenues, and U.S. pressure on banks to hold up the government's funds made it impossible for him to even submit a budget for next year.

He said it was unclear what the government's revenues would be and warned of an "economic disaster" if the financial pressure persisted.

Washington and other Western powers have cut aid to the cash-strapped Palestinian government over Hamas's refusal to recognize Israel, renounce violence and accept interim peace deals. Hamas, sworn to destroy Israel, has shown no signs of softening its position.

Hamas, which took control of the Palestinian Authority in March, has been unable to secure the funds to pay salaries to 165,000 government workers.

Work at many ministries has come to a halt because of a lack of funds for routine services and because many employees can no longer afford the cost of transport to work.

Abdel-Razeq proposed firing around 11,500 employees who do not regularly show up for work, and retiring another 5,000, moves that could increase tensions because most of those affected are members of Palestinian President Mahmoud Abbas's Fatah faction.

According to Palestinian law, workers over the age of 60 must retire.

"SIEGE"

Abdel-Razeq proposed encouraging the early retirement of 500 workers and cutting government fuel subsidies. Hamas wants to import fuel and gas into Gaza from Egypt instead of Israel.

He also asked the Palestinian Legislative Council for approval to sell off the remaining government assets from the Palestine Investment Fund, which Abbas controls.

Investment fund officials said Abbas was unlikely to agree to selling off the assets to pay salaries because doing so could result in the imposition of U.S. sanctions.

The officials said Abbas has used assets in the fund to pay the Palestinian Authority's water, electricity and fuel bills.

"It is not possible to present the 2006 budget," Razeq said. "The current siege requires reconsidering the projections we had issued earlier."

Palestinian Prime Minister Ismail Haniyeh pledged on Tuesday to pay a full month's wages in a few days to 40,000 workers whose salaries were less than 1,500 shekels ($332).

He also promised to pay each of the other 125,000 government workers, who earn higher salaries, an advance of 1,500 shekels.

But Abdel-Razeq said it was unclear when the 125,000 workers who earn more would get their money.

A Western diplomat said the Hamas-led Finance Ministry, in a bid to avert U.S.-led banking restrictions, planned to issue individual cheques to the 40,000 workers rather than transfer the money directly into their bank accounts.

Workers could then take the cheques to a local bank or money changer and seek cash. "The issue is whether the banks will honor them (the cheques)," the diplomat said.

(Additional reporting by Adam Entous in Jerusalem)

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