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Israel cuts off critical funds to Palestinian government

JERUSALEM—One day after the Islamist militant group Hamas took control of the Palestinian parliament, Israel's acting prime minister dubbed the new government a "terrorist authority" on Sunday and immediately cut off funds needed to keep the Palestinian Authority afloat.

Israel stepped up its efforts to isolate the incoming government now that it is run by Hamas, which introduced suicide bombings to the Israeli-Palestinian conflict and refuses to accept Israel's right to exist.

"Israel views the rise of Hamas as a dangerous milestone that turns the PA into a terrorist authority," acting Israeli Prime Minister Ehud Olmert said before his Cabinet approved the new steps.

The combative steps underscore the calculated risk Israel is taking in response to the Hamas victory: Israel's efforts to isolate the new Palestinian government could either force Hamas to moderate its views or drive it toward further extremism and deepen the economic despair of the Palestinian people.

Olmert said Israel would sever military and political ties to the Palestinian Authority until Hamas accepts Israel's right to live alongside a new Palestinian state, disarms its militants, renounces terrorism and accepts existing peace deals.

In the most significant punitive measure, Israel will stop funneling about $50 million in monthly customs and tax revenue that it collects for the Palestinian Authority and passes along to it.

The money is essential to paying the salaries of 138,000 Palestinian government employees, including 58,000 members of the security forces who could be thrown out of work.

Palestinian Authority President Mahmoud Abbas, the moderate leader undercut by the Hamas victory, told reporters in Gaza City that the Israeli moves were deepening his government's financial crisis.

Israel also is trying to convince other countries to cut off funding to the Palestinian Authority. The United States has demanded that the Palestinian government return $50 million in aid it gave last year, and it's unlikely to hand over any more money unless Hamas agrees to the changes sought by Israel and much of the rest of the world.

Following Israel's actions, a top Hamas leader, Khaled Mashaal, headed from Syria to Iran to seek financial support from a government whose president has called for Israel to be wiped off the map.

"Under the Israeli threats, the Palestinian government and the Palestinian people have the right to look for finances for this government from whomever—and no one has the right to oppose that," said Said Sayyam, one of the new Hamas lawmakers from Gaza.

Hamas last month won 74 of 132 seats in the new Palestinian Legislative Council, putting it in position to create a new Cabinet, which is charged with overseeing everything from the economy and security to education and foreign relations.

Abbas met Sunday with Hamas leaders at his Ramallah compound to begin the three-week process of choosing the Cabinet. As expected, Hamas tapped Gaza City lawmaker Ismail Haniyeh to be the next prime minister, and it will be up to him to form a new government.

Since winning the elections, Hamas members have been touring the Middle East in an effort to persuade Arab and Muslim nations to replace any loss of funds. So far they have obtained no public commitments of support.

An Israeli security official who spoke on condition of anonymity called the Hamas trip to seek funding in Iran "a bit of a bluff." The official questioned whether Iran had the ability to replace money from Europe and the United States. Iran provides about $100 million a year to Hezbollah militants in Lebanon, a sum that wouldn't even pay the salaries of the Palestinian Authority for one month, the official said.

In response to the moves by Israel, Haniyeh, the incoming Palestinian prime minister, said he wouldn't be intimidated.

"The Palestinian people and the Palestinian government will not be scared of this," he told reporters in Gaza City. "We and our people are able to manage with these obstacles and obstructions."

Mark Regev, a spokesman for the Israeli foreign ministry, said Hamas would be better served by agreeing to international demands for reform.

"If they're going to act like pariahs, they're going to be treated like pariahs," he said. "If they act like responsible members of the international community they're going to be treated like responsible members of the international community."

Cutting off direct aid could create problems. Disgruntled security forces have staged several violent marches and taken over government buildings in recent weeks to protest frozen salaries and small paychecks. Out-of-work security forces also could opt to vent their frustrations on Israel by staging attacks.

Regev said his government understands the dangers, but "the risk involved in passing money to a Hamas-led government we think is greater than the alternative."

Israel and the United States are trying to differentiate between money going directly to the Palestinian government and funds going to humanitarian projects in the West Bank and Gaza Strip.

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(Knight Ridder Newspapers special correspondent Mohammed Najib contributed to this report from Ramallah.)

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(c) 2006, Knight Ridder/Tribune Information Services.

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