EclectEcon

Despite recent pledges of major contributions from Iran and Qatar to the Palestinian Authority, its gubmnt is in dire financial straits [from ABC News, h/t to Jack for the pointer]:

Hamas has asked Arab countries to provide funds. But despite promises to give the authority $55 million a month, Arab nations have not given any money since the Hamas election victory. [emphasis added]

The Palestinian government already is two weeks late in paying March salaries for its 140,000 employees, and it is unclear when it will have the needed funds.

My guess is that unless other [Arab?] nations cover the shortages left by canceled EU and Western aid, then within a year (and possibly just a few months), the PA will declare its independence from the New Israeli Sheqel and the Jordanian Dinar and start printing money to pay its debts. The effect will, of course, be to create massive and rapid inflationary pressures. These will be followed by ruthlessly enforced price controls and foreign exchange controls.

These forecasts sound truly horrible, but given that Hamas is unwilling to acknowledge Israel's right to existence, they have few options. They will surely become much poorer and soon. If you have friends and relatives there, tell them to get real (vs. nominal).

Of course there is another option. Hamas, whether they mean it or not, could temporarily swear off their vow to obliterate Israel and talk nicely about co-existence. Just saying a few nice things would open the aid spigots all over again.

But this is a bad situation: a geographic region that has survived predominantly on handouts from the people they despise.

The Palestinian Authority is the largest employer in the West Bank and Gaza, sustaining about one-third of the population.

This cannot be a healthy, long-run equilibrium.