Israel halts payments to Palestinians

Israel, he added, “won’t have contacts with a government in which Hamas takes part”.

The Cabinet rejected even more drastic economic measures recommended by security officials, mindful of possible international reaction. But the withholding of funds Israel collects on behalf of the Palestinians still threaten to make life wretched for many Palestinians.

Hamas’ new parliament speaker, Abdel Aziz Duaik, denounced the decision as a ploy motivated by Israel’s March 28 elections. “This is a wrong decision, and the Israelis must reconsider it,” he said.

Hamas is sworn to Israel’s destruction and has killed hundreds of Israelis in suicide bombings.

Since sweeping to power in the Palestinian elections, it has refused to cave in to international pressure to disarm and recognise Israel’s right to exist.

Today, Hamas nominated the pragmatic Ismail Haniyeh to be its prime minister, a move that could be intended to put a more moderate face on the group as it readies to take power.

Palestinian leader Mahmoud Abbas was expected to travel to the Gaza Strip tonight to formally charge Haniyeh with the task of putting together a new Cabinet.

Haniyeh said a Hamas delegation would begin consultations with possible coalition partners tomorrow.

The Israeli Cabinet’s decision means Israel will halt the transfer of about €58.5m in taxes it collects monthly on behalf of the Palestinians under a 1994 economic accord. That money accounts for nearly half of the Palestinian Authority’s payroll, and could compromise the ability of the Palestinian government – the largest employers in the Gaza Strip and West Bank – to pay salaries.

Should the government find itself unable to meet its payroll, it could be forced to fire tens of thousands of people, creating even greater volatility and desperation in areas already flush with guns and mired in poverty.

Israel has withheld the tax payments in the past following Palestinian attacks on Israeli targets, putting the money in escrow and eventually transferring it.

“The next payment is to be made in early March, and it won’t take place,” said government spokesman Asaf Shariv.

Hamas has said it would try to make up any shortfall in part by recruiting money from the Arab and Muslim world.

The head of the Arab League, Amr Moussa, said that Arab governments were considering providing the new Hamas-led government with enough money to make up for the funds Israel plans to withhold.

Hamas’ stunning electoral victory – capturing 74 of 132 seats in its first run for parliament – caught Israel unprepared. Over the past week, officials have been hammering out a policy that would have to walk a fine line between creating pressure on the Palestinians and their new leaders, without making life for ordinary Palestinians so wretched that it would compromise Israel’s international campaign to shun Hamas.

The West has supported Israel’s campaign against Hamas, threatening to cut off hundreds of millions of dollars that it funnels to the Palestinians annually unless Hamas recognises Israel and renounced violence.

In addition to halting the transfers, the Cabinet also decided to ask the international community to stop its aid to the Palestinians, though it said humanitarian aid should continue as long as donors guarantee the money won’t be used for terrorist attacks.

Hamas is taking over from Abbas’ long-ruling Fatah Party, which fell out of favour because of its failure to eradicate corruption and lawlessness on Palestinian streets.

Abbas, elected separately last year to a four-year term, remains in office, and has taken recent stops to consolidate his power.

On Saturday, he pointedly told the militant group that he intends to carry on with his peacemaking agenda.

Hamas immediately said negotiations with Israel were not on its agenda, but both the militants and Abbas said they would try to talk through their differences. Talks between Abbas and Hamas leaders were scheduled to take place today.