Quartet envoy to the Middle East, James Wolfensohn, said Monday "the Palestinian Authority was on the verge of economic collapse within two weeks time."
The reason, he said, was the cessation of tax funds to the PA from Israel.
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In a letter he wrote to the US government, Wolfensohn warned that even if the PA were to exist on emergency funds, the economic situation could lead to violence.
Voices have been raised in the Quartet (the US, EU, Russia and the UN) arguing that the cutoff date by which Hamas must accept certain preconditions or face international isolation is "malleable" and not necessarily the day a Hamas government is formed, The Jerusalem Post learned.
One Western diplomatic official said that among the questions the Quartet principals were dealing with now was what would happen if Hamas were to make some move toward recognizing Israel and continue to abide by a cease-fire, but would not go all the way toward full-throated recognition of Israel or committing itself to nonviolence.
Palestinian Authority Prime Minister-designate Ismail Haniyeh on Sunday denied that Hamas was prepared to make peace with Israel, saying he had been misquoted by The Washington Post
Haniyeh said his comments had been misunderstood.
He said he was not referring to a peace agreement, only a "political truce."
"I didn't talk about recognizing Israel during the interview with the newspaper," Haniyeh told reporters in Gaza City.
With HERB KEINON AND HILARY LEILA KRIEGER