A Palestinian kid sits on sacks of donated food in the Shati refugee camp in Gaza City.

OCCUPIED JERUSALEM, May 4, 2006 (IslamOnline.net & News Agencies) – Several initiatives by donor states to bypass the Hamas-led government and get money directly to the Palestinians are being thwarted by the US, Israel's Haaretz daily reported on Thursday, April 4.

With the encouragement of Israeli officials, the Bush administration has blocked similar proposals by Britain, the European Commission and the Arab League to channel aid and taxes Israel collects for the Palestinian Authority through special funds.

One of the proposal suggested using the Holst Fund which was set up in 1994 after the Oslo Accord and is managed by the World Bank.

The new government has yet to pay March and April wages to 165,000 employees.

Palestinian officials also acknowledge that American pressure has thwarted a plan for the Arab League to deposit donor funds directly into the accounts of government workers.

The Arab Bank, which holds some 30,000 accounts of PA workers, refrained from accepting such transfer after the US threatened to deem this as assistance to Hamas.

The United States and the European Union have suspended direct aid to the Palestinian Authority.

Washington has also barred American citizens and organizations from business dealings with the PA.

Israel has since February stopped transferring customs duties worth around $50 million a month and previously collected for the PA.

Transatlantic Differences

A British proposal to set up a trust fund to help pay overdue salaries directly to PA employees has highlighted transatlantic differences over dealing with the Hamas-led government.

A British government document obtained by Reuters calls for creating a trust fund to "mitigate the decline in living standards of the Palestinian people and reduce the possibility of domestic instability by sustaining delivery of basic services such as health and education."

Under the proposal, donors would put money into the trust fund, which would then move the money directly into a commercial bank account outside the PA's control.

The money in the fund would be used for pre-approved services, from workers' salaries to medical supplies.

The International Monetary Fund has estimated $45 million a month would be needed for health, education and other basic services.

"Direct payment of salaries to the bank accounts of key workers would help maintain basic services and put money into the Palestinian economy," the British document said.

Supporters say the proposed trust funds would help prevent the PA and its institutions from collapsing under Western financial pressure.

But the Bush administration has moved in recent days to block the proposals.

Despite the US objections, British and other European diplomats say they are pushing ahead with the plans for a trust fund, which would be managed by the World Bank, the International Monetary Fund or the United Nations.

"The work is still going on," one Western diplomat told Reuters.

Another senior Western diplomat said the Bush administration could single-handedly veto the proposals.

Even if the United States agreed to let the Europeans proceed, the senior Western diplomat added: "It will take a long time to set (a trust fund) up. It might be too late."

Increasingly desperate for funds, the Palestinian government has asked Palestinian monetary authorities for an emergency $100 million loan.

"We're studying this issue. We have not made a decision yet," George el-Abed, the head of the Palestine Monetary Authority told reporters in Ramallah.

But the Authority, which is independent of the government and regulates banks that operate in the West Bank and Gaza, does not appear to have enough funds to make the loan.

The Authority has an estimated $41 million in reserves and $26 million on hand in cash.