More than fiscal crisis in Palestine

Despite all of the media attention Israel and Palestine usually receive, no one is talking about Palestine’s fiscal crisis.  Kate Seelye of the Middle East Institute (MEI) opened a panel hosted by MEI and Johns Hopkins SAIS on “The Political and Economic Implications of the Palestinian Authority’s Fiscal Crisis” by noting the presidential debates made it clear this issue will only receive less attention in the future, regardless of who is elected.  The panelists explained that the world cannot afford to put this issue aside. Unless progress is made a two-state solution may become impossible.

Hussein Ibish, senior fellow at the American Task Force on Palestine and the event’s moderator, summarized the fiscal crisis:  the failed Palestinian UN bid in September of 2011 caused a crisis in the donor community, which provides one billion dollars to the Palestinian Authority per year.  The Palestinian Authority has been unable to pay state employees on time.  Oussama Kanaan of the International Monetary Fund pointed to a confusing aspect of this problem:  the amount of money that the Palestinian Authority needs to pay all of its employees is relatively small, so why has no donor come forward?  There is a $400 million deficit, assuming the United States pays the $200 million it pledged (which is not certain given Palestine’s announcement that it will petition in November to become a nonmember observer).   At a recent donor meeting in New York, France came forward, but only with $10 million.

When the risks are so high, why is there resistance to action?  Kanaan hypothesized that donors are unwilling to commit until the peace process has been revitalized.  This was true during the Palestinian fiscal crisis of 2007 so the donor community, Israel, and Palestine met in December of 2007 in Paris to lay out a transition plan.  Israel committed to gradually relax restrictions on the movement of goods and people and Palestine promised to strengthen its institutions.  The World Bank and the IMF measured progress based on benchmarks over the period between 2008 and 2010.  The results exceeded expectations, but in 2012 after Palestine’s failed UN bid and the expiration of the three year plan, the international community finds itself without a strategy.  The advances made between 2008 and 2010 are unraveling.

Kanaan offers two possible solutions:  convene another meeting like the Paris one in December 2007 or quit struggling for a transition solution and start work on a permanent plan for peace and stability.

Brookings Institution’s Khaled Elgindy supports the latter solution.  “The peace process is dead,” he said.  It is time to look for different strategies.  The peace process failed because it was unbalanced, disjointed and detached from reality. The different application of the Quartet principles and the Road Map illustrates the imbalance.  The former is applied as if it had the strength of a Security Council Resolution, but the UNSC-endorsed Road Map has been ignored and destroyed by Israel with Quartet support, he said.

The peace process was built on contradictions.  The Palestinian Authority is a government without a state.  It is treated as representing all of Palestine when there is a divide between the West Bank and Gaza. The peace process actually facilitated the occupation of Palestine and its dependence on foreign aid.  It is impossible to have a healthy economy under occupation, especially when the state is not in control of 60% of its territory or the movement of people and goods.  The failure of the peace process is intimately connected to the failure of legitimacy.  Years of failed negotiations, the Palestinian Authority’s inability to represent all of Palestine, and the lack of Palestinian control of Gaza eroded the Palestinian Authority’s leadership.

The failures of the peace process and leadership pushed US/Palestinian relations into the “realm of infantilization,” said Elgindy.  Elgindy quoted a State Department official in 2012 saying that what matters to the peace process is that the prime minister and the president remain in power.  This remark is troubling at a time when the United States is supporting citizen-led movements to make governments more responsive to the people.  Elgindy’s solution is that we let the peace process go and focus on doing no harm, building consensus, and ending the occupation.

Robert Danin of the Council on Foreign Relations agreed with Elgindy and Kanaan on the problematic lack of a working peace process and Israel’s failure to relax restrictions enough.  Danin emphasized that there is a lot happening on the ground, though the international political conversation doesn’t reflect this.  Though the United States pulled back in 2011, other states have been working to keep a more serious crisis from developing.  Usually political progress precedes changes on the ground, but the Palestinian Authority met the Paris benchmarks marking it a stable, functioning government but now has no political process to support it.  Israel won’t make concessions without being asked.  A Netanyahu aide told Danin that there was no incentive to help if Israel was not going to receive anything for its concessions.  Danin argued that the solution is to take action before all faith in a two-state solution dies, but with a new conceptual approach where economics and politics are taken together.

Though Danin believes time might really be running out for a two-state solution, Elgindy argued that the peace process and a two-state solution are not the same.  The death of one does not mean there is no hope for the other.  Danin reported that in 2001 and 2002 during the intifada the international community thought the peace process was dead, but with effort it was revitalized.  Prime Minister Salam Fayyad also said recently that he would accept a deal like the one offered by Prime Minister Olmert in 2008.  This goes to show, Danin said, there is a difference in the Middle East between dead, really dead, and so dead there’s no hope.  Hopefully the peace process is just “dead.”