Hot Palestinian Summer – OpEd


By Yacov Ben Efrat

We can relax: the disturbances in the Occupied Territories appear to have subsided, and the would-be third Intifada may have skipped over 2012 as it did over 2011. Back then it was supposed to break out after Abu Mazen vainly sought a Palestinian state at the UN Security Council. Israeli intelligence missed the mark in 2011 and misled others. This year, when all its analysts were worrying about how to get through the Jewish holidays in peace and quiet, they completely missed what was about to happen in the Palestinian territories. The protest broke out in reaction against a hike in petrol prices, derived from a similar price hike by the Israeli government, which seeks to reduce its budgetary deficit. After the Israeli social protestors tired and lost interest in demonstrations, the baton has passed to the Palestinians, who suffer many times more from the cost of living. What can you do: after 45 years of an Occupation that flooded their markets with Israeli goods, they too eat Tnuva cottage cheese, whose price triggered protest in Israel last year.


The Palestinian response to the petrol hike came very fast and was far less polite than the Israeli version. The Palestinians weren’t ashamed to shout that their prime minister, Salam Fayyad, should “get the hell out!” As for Israeli PM Bibi Netanyahu, he didn’t need to form a new Trajtenberg Committee to pacify the Palestinians. He simply injected $250 million from the taxes he collects for the Palestinian Authority (PA), thus enabling it to pay part of its August salaries. Fayyad too was compelled to roll back the increase on petrol prices, as well as reduce the Value Added Tax (VAT) from 17% (the Israeli rate) to 15%.

Occupation Economics

The Palestinian protest, like the Arab Spring, is not aimed directly against Israel, and this fact bothers Netanyahu. The hatred is not against Jews, rather against the PA that is supposed to be serving them. The demonstrating Palestinian youth understand that the protests against the Israeli checkpoints work in favor of the PA leaders, who like to blame the Occupation for their society’s ills, shrugging off responsibility. However, ever since the signing of the Oslo Accords in 1993, the Israeli Occupation has acquired a new form. Israel outsourced control over the Palestinian population, creating the PA as a service contractor. The latter is supposed to keep the peace and provide the residents with services, financed by donors like the EU, the US and the rich Arab states.

Like every subcontractor, the PA cuts itself a fat coupon on the workers’ account, and the donor money greases the wheels of its high officials, business cronies, clerks and police (whose function is not at all clear). Beneath this thin layer is the vast majority, who suffer from unemployment of at least 20% (30%, according to the General Secretary of the Palestinian Trade Unions) and a daily wage of $12 or so. It is clear that the arrangement cannot go on forever. The same reality was a factor leading to the second Intifada in the year 2000 and the rise of Hamas. The same reality is preparing the conditions for the third Intifada, which will be directed this time against the subcontractor and will dispel the fond illusion which goes by the name “Palestinian state.”

Economically speaking, we live in a binational state. The government of Israel is the sovereign in all economic areas: the Bank of Israel determines, by means of the shekel, the PA’s currency policy, while Israel’s Treasury Secretary controls PA fiscal policy by means of the “customs envelope” common to both parties. The problem is that the economic control in no way obliges Israel, because Israeli law is irrelevant in the PA territories. The labor laws, the national insurance, and all the public services which exist in Israel do not apply to the residents of the PA.

The outcome is social tragedy. The prices are Israeli prices, but the services and the wages are more like those in Syria and Egypt. Poverty rises—and with it anger at the PA leaders and their allies who benefit from the arrangement. The economic situation is similar to that in other Arab lands. A Palestinian Spring, long in the bud, can sprout at any moment.

The economic crisis in Europe and the US also has a part in the timing of the protests. The donor nations have cooled toward the PA. The Arab Spring has opened opportunities elsewhere, whereas the money that flows into PA coffers does not go to building an economy, rather only to financing the pleasures of the middle class, which consumes but does not produce. Israeli intransigence on a peace accord and the establishment of an independent Palestine have created an impression of pouring good money into a bottomless barrel.

To what have the donations contributed? To the creation of a big consumer bubble. Until now, the gap between PA salaries and the rise in the cost of living was bridged by loans from banks, which have sprouted like mushrooms. Today, when donations begin to dwindle while the PA deficit swells, it is clear that the party is grinding to an end. If in the past the middle class got benefits from the Oslo Accords, receiving mortgages and buying cars on credit, today it can no longer pay its debts. As in Israel, so in the West Bank, it was the middle class that first went out to demonstrate. The holdback on salaries, the petrol price hike, and the VAT propelled them into the streets. As in the Arab countries, the protest of the middle class opens a gateway for the protest of the poor, which will be angrier and more violent.

The PA on the Verge of Bankruptcy

Like Greece, Spain, and Ireland, the PA is on the edge of bankruptcy. But it has no Germany or Bank of Europe to bail it out, rather only Israel, and the coinage is not the euro, rather the shekel, which Israel controls. There is no chance in the world that the Bank of Israel will decide on a package to save the PA when it can’t even save the million destitute Israelis. “The poor of your land come first,” and the poor of the neighboring autonomy will have to manage alone.

However, the bankruptcy of the subcontractor places the boss before a hard choice. The fall of the PA will leave Israel alone in responsibility for the Occupied Territories. The result is paradoxical: The more Israel deepens its hold and builds settlements, the more it weakens the PA, increasing its own responsibility for those trapped behind the separation barrier which it built.

The Palestinian demonstrators demand cancellation of the Paris Agreement, the economic part of Oslo, for it chains them to the Israeli economy—as if the cancellation alone might lay the economic foundation for an independent state. But there’s a fly in the ointment. Independence would mean not just control of the currency and of fiscal policy, but also the definition of the territory where the Palestinian law and economy will apply. Such a definition, however, is something that Israel refuses to discuss, and the settlement project makes the problem insoluble. The demand to cancel the Paris Agreement therefore puts the cart before the horse. The way to gain economic independence from Israel is first to gain political independence, that is, to cancel the Oslo Accords to which the Paris Agreement belongs.

Netanyahu is conducting a much publicized campaign on the issue of Iran and the bomb. He is ready to send planes 3000 kilometers in order to save Israel from an imagined new Holocaust. But right outside his window the ground is quaking. The Palestinians are again being pushed, with excessive force, into the Israeli agenda. Bibi sees far-off Iran, but he won’t look into his own backyard. His economic policy and his political blindness are creating the conditions for a new round of violence.

Despite all the attempts to hide this reality, it is coming to meet us. The moment is approaching when Israel will have to decide between a return to full military and civil control over the Territories or, alternatively, withdrawal and abandonment of the settlements in order to enable an independent Palestine. Given that there is no political arrangement in sight, a Palestinian Spring becomes almost the only choice. Like Assad in Syria, Bibi may then send his soldiers to put down demonstrations by the Palestinian poor, but if he does this, then he, like Assad, will lose all legitimacy, and so will the nation he leads.

– Yacov Ben Efrat contributed this article to (This article was originally published in Challenge Magazine –

Palestine Chronicle

The Palestine Chronicle publishes news and commentary related to the Middle East Peace Conflict.

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