JERUSALEM - Palestinian refugees reacted with dismay on Saturday to a United States decision to halt funding to a U.N. agency, warning that it would lead to more poverty, anger and instability in the Middle East.The U.S. announcement on Friday that it will no longer support the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) has deepened a cash crisis at the agency, and heightened tensions with the Palestinian leadership.The 68-year-old UNRWA provides services to about 5 million Palestinian refugees across Jordan, Lebanon, Syria and the West Bank and Gaza. Most are descendants of the roughly 700,000 Palestinians who were driven out of their homes or fled the fighting in the 1948 war. In Gaza, Nashat Abu El-Oun, a refugee and father of eight, said: "The situation is bad and it will become worse...People can hardly afford living these days and if they became unable to earn their living they will begin thinking of unlawful things."State Department spokeswoman Heather Nauert said on Friday that UNRWA's business model and fiscal practices were an "irredeemably flawed operation" and that the agency's "endlessly and exponentially expanding community of entitled beneficiaries is simply unsustainable."UNRWA rejected the criticisms, with spokesman Chris Gunness describing it as "a force for regional stability."Speaking in Jordan, where more than 2 million registered Palestinian refugees live, including 370,000 in ten refugee camps, Gunness said: "It is a deeply regrettable decision...some of the most disadvantaged, marginalized and vulnerable people on this planet are likely to suffer."Gunness said UNRWA provides health clinics, schooling for 526,000 refugee children across Jordan, Syria, Lebanon, Gaza and the West Bank and food assistance to 1.7 million people - a million of them in Gaza. The agency will now ask existing donors for more money, and seek new sources of income."Our funding gap is $217 million ... so although we have opened up our schools just this week we have made it clear that we only have money until the end of September," he said.