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Fayyad: PA close to breakdown after tax block

Nov. 24, 2011 6:39 P.M. (Updated: Nov. 29, 2011 12:58 P.M.)
OSLO (Reuters) -- The Palestinian Authority is "fast approaching the point of being completely incapacitated" by Israel's refusal to hand over tax revenues belonging to the authority, Prime Minister Salam Fayyad said Thursday.

Israel's freeze on the taxes and fees it collects for the Palestinian Authority at borders has deprived the government of two-thirds of its normal revenue since Nov. 1, making it hard to pay salaries and fix infrastructure, Fayyad said.

"This is our money," he said. "It has nothing to do with donor assistance or anything like that."

He spoke at a press conference alongside Norwegian Foreign Minister Jonas Gahr Stoere, who demanded an end to the policy that Israel imposed a day after the UN cultural agency UNESCO granted full membership to the Palestinians.

"It amounts to waterboarding an economy," Stoere said, "because you almost kill it while allowing a small amount of air to come in."

Israel has called the withholding of funds "temporary" and complained the Palestinians were unwilling to open direct peace talks, while Palestinian leaders have said they would talk only if Israel halts settlement activity in areas it occupies.

Fayyad said the frozen funds amount to some $100 million per month, or two-thirds of the Palestinian Authority's revenue stream excluding international aid.

He spoke shortly after President Mahmoud Abbas met in Cairo with exiled Hamas leader Khalid Mashaal to push implementation of a reconciliation deal between their parties.

Fayyad reiterated that he was willing to step down if it would help heal divisions between the rival factions and pave the way for presidential and parliamentary elections. Hamas has rejected him as head of a joint government.
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