Gaza near to collapse as Israel tightens grip, says bank

by Toni O'Loughlin in Jerusalem

from the Guardian

Israel's blockade of Gaza is pushing the territory to the brink of collapse and fuelling the growth of a black money market controlled by Hamas, the World Bank warned yesterday.

As tit-for-tat attacks across the Gaza border began to intensify following the end of a six-month truce on Friday, the World Bank said that an acute cash shortage in Gaza was playing into Hamas's hands. The militant Islamists, who took control of Gaza in June 2007 following violent street clashes with their more secular rival, Fatah, have large stashes of shekels which they have been selling on the black market at a premium because of the cash shortage. 

There is also a worry that Hamas, with its dominant militant and bureaucratic control of Gaza, will begin to replace the shekel with US dollars, which are more easily obtained, to smuggle through the tunnels from Egypt in the south.

The World Bank, the International Monetary Fund and the Quartet - the US, the EU, Russia and the United Nations - warned Israel of the crisis in a letter to the prime minister, Ehud Olmert, more than a week ago, to no avail. Instead, Israel continued to tighten its 18-month blockade of the tiny coastal territory, forcing banks and businesses to shut their doors, water, sanitation and electricity services to cease, medical clinics to turn away patients, and bread queues to form in the streets. Since the end of the truce, daily clashes have resumed, with Israel launching air strikes on Palestinian rocket-launching teams and Palestinian fighters firing makeshift rockets and mortars at neighbouring Israeli towns.

Yesterday, Israel's air force attacked a rocket-launching site and Palestinians launched 18 Qassam rockets, one of which struck a house and another a factory, while a third exploded near farm labourers, injuring one. Most landed in open fields. In the afternoon gunmen also shot at workers near the perimeter.

The two main rivals in Israel's February elections both vowed yesterday to remove Hamas from power, using military means if need be. "The state of Israel, and a government under me, will make it a strategic objective to topple the Hamas regime in Gaza," said Tzipi Livni, the foreign minister who will lead the ruling centrist party, Kadima, in the polls. "The means for doing this should be military, economic and diplomatic."

Later, Binyamin Netanyahu, who leads the hard-right Likud party and who has been ahead in the polls for months, said: "In the long term, we will have to topple the Hamas regime. In the short term ... there are a wide range of possibilities, from doing nothing to doing everything, meaning to conquer Gaza." 

Israel has been unable to find a lasting military solution to years of rocket fire from Gaza, and a series of reports from the World Bank suggests its policy of blockading the coastal area to break Hamas's control has not only failed but is now jeopardising the US-backed Palestinian Authority in the West Bank.