US, EU welcome Israeli decision to transfer Palestinian tax funds

Jerusalem made deductions for PA debts; Mogherini: Step will "ensure vital relief."

Federica Mogherini (photo credit: screenshot)
Federica Mogherini
(photo credit: screenshot)
The US and EU welcomed on Friday an Israeli decision to transfer Palestinian tax funds that it has withheld since January to protest the Palestinian Authority’s decision to join the International Criminal Court.
“This is an important step that will benefit the Palestinian people and help stabilize the situation in the West Bank,” US State Department acting deputy spokesman Jeff Rathke said Friday. “We hope that both sides will be able to build on this and work together to lower tensions and find a constructive path forward.”
EU foreign policy chief Federica Mogherini said the lack of funds had been undermining the Palestinian Authority.
“The European Union has been pressing for this step, without which the Palestinian institutions’ capacity to govern risked being fatally undermined,” Mogherini said. “Finally, after three months, this step will ensure vital relief for thousands of Palestinian Authority workers and their families.”
More than $500 million has accrued since Israel stopped its monthly transfer of tax and customs duties that it collects on behalf of the PA.
In response, the PA cut most of its employees’ salaries by 40 percent and resorted to an emergency budget.
With the Palestinian deficit already at around 15% of GDP and the tax transfers accounting for two-thirds of income, the budget fell into a deeper hole every month. Unemployment stands at 25% and output is set to contract this year, sharply increasing the threat of instability and violence.
The US and the EU have pressed Israel to transfer the funds since it announced the freeze. Late Friday afternoon, Israel announced it would hand the PA revenues that had accrued from December and “up until February.”
It added, however, that it would offset that sum with payment for outstanding bills Palestinians owe Israel for electricity, water and hospitalization.
The transfer of funds was approved by Defense Minister Moshe Ya’alon, the IDF and the Shin Bet (Israel Security Agency).
The Prime Minister’s Office said the decision was made out of humanitarian concern for the Palestinians and with an eye to Israeli interests.
“Given the deteriorating situation in the Middle East, one must act responsibly and with due consideration alongside a determined struggle against extremist elements,” said Prime Minister Benjamin Netanyahu.
The move comes in the midst of a crisis in relations between Netanyahu and US President Barack Obama.
Netanyahu is seeking to undo the damage to that relationship caused by his pre-election maneuvers, including statements that a Palestinian state would not be created during his premiership. He has since clarified that he remains committed to a two-state solution to the Israeli-Palestinian conflict, but the Obama administration said that his words have caused them to reassess their policies regarding the peace process.
The release of the tax funds also came just one day before PA President Mahmoud Abbas spoke to the Arab League in Cairo and said the Palestinians were in the process of “reevaluating economic, political and security ties with Israel.”
According to WAFA, the Palestinian news and information agency, the Palestinian Finance Ministry called on Israel to release all the funds and rejected any Israeli unilateral deductions, which it said were “unjustified and illegal.”
Mideast Quartet representative Tony Blair said, however, that he welcomed the Israeli release of the funds, which “are a vital part of the PA budget, and without these monies, the stability of the Palestinian economy is put at risk,” he said. “I hope this will be the first of many steps, on both sides, that will mean we can work with renewed vigor to create the conditions for proper negotiations as we progress towards a two state solution.”

Reuters contributed to this report.