Israel has announced that it will not transfer funds to the Palestinian Authority following the decision by Spain, Norway, and Ireland to recognize Palestinian statehood. Finance Minister Bezalel Smotrich cited the European countries’ move as justification for withholding the much-needed tax revenues that Israel collects on behalf of the authority. The decision could further deepen the Palestinian government’s fiscal crisis, as these revenues make up a significant portion of their budget.
In response to the European countries’ recognition of Palestinian statehood, Israel recalled its ambassadors from Spain, Ireland, and Norway and chastised their governments for giving “a gold medal to Hamas terrorists.” The decision by Israel to withhold tax revenues from the Palestinian Authority is seen as a direct response to these European countries’ actions. The Palestinian leadership is expected to face further financial challenges as a result, as they rely heavily on the funds collected by Israel.
The Palestinian Authority has condemned Israel’s withholding of tax revenues in the past as “piracy.” The situation is exacerbated by the ongoing financial crisis in the Palestinian territories, which has been worsened by Israeli restrictions on funding and a struggling economy. The authority has been unable to pay full salaries to civil servants, leading to concerns about potential unrest in the West Bank.
Tensions between Israel and the Palestinian Authority have escalated in recent months, with Palestinian officials rejecting reduced payments from Israel as a form of protest. The Authority traditionally disperses some of the tax revenues collected by Israel to Gaza, but this arrangement has been disrupted by the ongoing conflict and financial difficulties. Israeli officials, including Prime Minister Netanyahu, have criticized international recognition of a Palestinian state as rewarding terrorism and have expressed opposition to the idea of a sovereign Palestinian state.
The Biden administration has called for Gaza to be unified with the West Bank under a “revitalized” Palestinian Authority, but Israel remains strongly against this proposal. The Palestinian Authority is viewed as complicit in Israel’s occupation by many Palestinians, leading to dissatisfaction with its current form. With the Israeli government rejecting the establishment of an independent Palestinian state and tensions escalating over financial issues, the prospects for peace talks and a resolution to the conflict remain uncertain.
