Israel said Monday it would resume regular monthly transfers of about $100 million in taxes and customs it collects for the Palestinian Authority, a step bound to ease but not end the protracted cash crisis of the self-rule government in the West Bank.
Israel has repeatedly halted the money transfers over political disputes, most recently after the Palestinians' successful bid in November to win U.N. recognition of a state of Palestine in lands Israel captured in 1967.
Palestinian Prime Minister Salam Fayyad accused Israel of withholding the funds illegally, saying the money belonged to the Palestinians. Israel has released some money since the U.N. recognition, but not on schedule.
Israel's decision came just days after President Barack Obama met separately with Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas during a visit to the region. Obama said stabilizing the Palestinian Authority, which is buckling under mounting debt, is key to U.S. peace efforts.
The transfers are an important part of the budget of the Palestinian Authority, which administers 38 percent of the West Bank. In recent months, the Palestinian Authority has struggled to pay the salaries of tens of thousands of civil servants — the backbone of the local economy — and repay its debt to the private sector.
The financial crisis began in 2010, with donors — mainly Arab countries — not meeting aid pledges, Fayyad has said. In 2013, the Palestinian Authority will have an anticipated budget deficit of $1.5 billion, out of an overall spending plan of $3.5 million, Fayyad told reporters.
The Palestinian Authority has operating costs of about $300 million a month, with more than half spent on the government payroll. The Israeli transfers are critical to keeping the Palestinian Authority afloat.
Meanwhile, wide gaps remain on the terms of renewing Israeli-Palestinian negotiations that broke down more than four years ago. Obama heard from both sides during his visit and U.S. Secretary of State John Kerry is making a new push to restart the talks.
The Palestinians say Israel must freeze settlement building in the West Bank, Gaza and east Jerusalem, the lands it captured in 1967, before any negotiations can resume. Israel says the issue of settlements can be addressed during negotiations.
Obama has sided with the Israeli view, and it is not clear how the U.S. can bring the Palestinians back to the table without a settlement freeze.
Arab countries are now being asked to help, said Yasser Abed-Rabbo, a top official in the Palestine Liberation Organization.
"U.S. efforts will increase in coming weeks and will include other Arab parties, such as Jordan and Egypt," Abed-Rabbo told Voice of Palestine radio Monday, adding that an Arab League delegation is to visit Washington as part of these efforts.
However, he said there would be no flexibility on Palestinian demands for a settlement freeze.
"For us, the important thing is the substance, such as the full settlement freeze and the recognition of the 1967 borders," he said.
The Palestinians want a state in the West Bank, Gaza and east Jerusalem, but are ready to negotiate border changes, provided the 1967 frontier is the baseline.
Palestinian officials say they cannot return to talks without such a clear framework, arguing that open-ended negotiations will simply provide diplomatic cover to Israel to keep expanding settlements.
"We fear they (the Israelis) would waste time by getting us into a bargaining process over details and steps here and there, and in this way would waste two to three years and then get us to wait for a new U.S. administration," Abed-Rabbo said.
Netanyahu has said he is willing to resume talks immediately. However, he has said he will not relinquish control over east Jerusalem and has refused to recognize the 1967 lines as a starting point for talks.
For 10 months during his previous term, Netanyahu curbed settlement building as part of a U.S. push to bring the Palestinians back to the table, but negotiations never got off the ground.
Successive Israeli governments have built dozens of settlements in the West Bank and east Jerusalem, now home to more than half a million Israelis. Israel withdrew from Gaza in 2005, dismantling almost two dozen settlements there, but sharply restricts access to the territory.