We're broke, need aid - Hamas PM tells world community

MIDDLE EAST: Prime Minister Ismail Haniyeh told the first full meeting of his Hamas-led cabinet that the Palestinian government was broke and urged the international community not to slash aid.

"The Ministry of Finance has inherited an entirely empty treasury, in addition to the debts of the ministry and the government in general," said Haniyeh, also a senior leader of the Islamic militant group.

The new Palestinian government is facing Western isolation and cuts in aid to its administration unless it recognises Israel, renounces violence and accepts interim peace accords.

There is also domestic discord. President Mahmoud Abbas, whose long-dominant Fatah faction was ousted by Hamas in January legislative elections, announced he was taking charge of borders under Palestinian control, drawing government censure.

Haniyeh said the government would do its best to pay salaries to the Palestinian Authority's 140,000 employees despite a cash crunch caused in large part by cuts in Israeli tax revenue transfers following Hamas's election win in January.

Hamas has previously expressed confidence it would make up for any cash shortfalls with aid from Iran and other Muslim nations. Haniyeh gave no figures on the Authority's debts.

Palestinian Finance Minister Omar Abdel-Razeq said the government expected to receive $80 million from Saudi Arabia, Kuwait and the United Arab Emirates to help pay March salaries. But he said it was unclear when the Palestinian Authority would secure the funds. March salaries totalling about $118 million were scheduled to be paid earlier this week.

"We have promises, but efforts are needed to make the promises real," Haniyeh said. The "Quartet" of Middle East mediators the United States, the European Union, the United Nations and Russia has threatened to cut direct aid to the Palestinian Authority unless Hamas abandons its charter call for Israel's destruction.

It is unclear how much of more than $1 billion a year that the Palestinians get in foreign donations could be withheld.

Holding out an olive branch, EU foreign policy chief Javier Solana said his 25-nation bloc was disappointed by the Hamas government programme but there was room for it to change.

Meanwhile the new Hamas-led Palestinian government is struggling to find a bank willing to handle its finances, casting doubt on whether it can pay staff or receive foreign aid, Western diplomats and Palestinian officials said.

"You cannot run a government without having a bank," said a Palestinian official familiar with the Palestinian Authority's "single treasury account", where foreign donors deposit funds so the Authority can pay 140,000 workers and cover other expenses.

A Western diplomatic source said Hamas's difficulties in even finding a banker could "disrupt the entire payment system".

Officials of Hamas, which is listed by Washington and the EU as a terrorist organisation and whose charter calls for Israel's destruction, say the banking problem is part of an international campaign against the Islamist group.

A Hamas cabinet minister said on Wednesday the Amman-based Arab Bank, which has long handled the treasury account, had come under pressure from "abroad" to stop working with the Authority now that it was under Hamas control. Gaza,Thursday, Reuters.