JERUSALEM — Israeli-Palestinian violence is spilling over from the battlefield to a new venue — the pocketbook.
Bank accounts, accounting books, checks and cash are being recruited against the other side. And like much in the bitter conflict, even accounting systems have become emotionally laden.
Israel is considering dipping into tax funds it has withheld from the Palestinian Authority to make up for losses due to the al-Aksa intifada.
Eager to find every available shekel to shrink Israel’s growing government deficit, Finance Minister Silvan Shalom first raised the idea last month. Although Foreign Minister Shimon Peres opposes adding a financial aspect to the conflict, Prime Minister Ariel Sharon last week ordered Israeli Cabinet Minister Dan Naveh to tally the cost of the 16-month-old uprising.
On the other hand, the Palestinian Authority claims Israel owes it $8 billion for damages the intifada has caused to Palestinian trade and wages lost from workers barred from their jobs in Israel.
Complicating matters further, the European Union now says Israeli retaliation against Palestinian targets has damaged some $17 million in E.U.-financed infrastructure projects. Israeli officials worry that the E.U. announcement may be a prelude to a formal claim for compensation.
Naveh’s team met last week to assess the economic damage of the intifada. Initial estimates, he said, indicate that the Israeli economy has suffered billions of shekels of direct and indirect damage since September 2000, according to reports.
In addition, the National Insurance Institute reportedly paid some $50 million to terror victims last year. Actual damages may be much higher, but a thorough accounting is needed to come up with exact figures.
Naveh requested that the different government offices begin collecting economic data, which will be reviewed by a subcommittee representing the Prime Minister’s Office, the Treasury and the Bank of Israel.
Naveh’s investigation coincided with a lawsuit 22 Israeli companies filed last week for compensation for $4.4 million in unpaid Palestinian bills. The firms charge the Palestinians are refusing to pay their bills for political reasons, and are demanding that the Israeli government make good from some $400 million in tax funds it owes the Palestinian Authority.
The money comes from income taxes and Social Security payments for some 100,000 Palestinians who worked in Israel before the fighting began, along with custom duties and sales taxes on gas and cigarettes.
Israel froze the tax transfers shortly after the intifada began, arguing that the Palestinian Authority would use the money to pay the salaries of its security services, which have aided and even led attacks on Israel.
The Palestinians, too, have their share of economic grievances, particularly over the frozen tax money. Before September 2000, Israel used to transfer the payments to the Palestinian Treasury each month. The amount — more than $50 million a month, on average — was enough to meet the entire Palestinian government payroll, from doctors and schoolteachers to bureaucrats and policemen.
The Palestinian minister for economy and trade, Maher Al-Masri, warned Israel against dipping into the funds.
“This would be sheer robbery,” he said. “The Israelis have no right to take our money.”
Evidently there is no end to the list of mutual claims. According to U.N. reports, which have followed the Palestinian economy since the early days of the current conflict, Israeli restrictions on Palestinian goods and workers have cost the Palestinians hundreds of millions of dollars in lost wages and sales.
Unemployment in the Palestinian areas has climbed to approximately 60 percent since the outbreak of fighting, and more than half the Palestinian population now lives in poverty, double the rate before, according to official figures.
The violence also has taken a serious economic toll on Israel production. Israel’s Treasury, in times of relative peace, had predicted annual economic growth of about 4 percent. Those estimates now have fallen to 1 percent or less.
Tourism has vanished and foreign investors have quit, leaving the Tel Aviv stock exchanges to fluctuate nervously.
Farmers and contractors who used to employ Palestinian workers have switched to foreign workers — but the government, in its fight against unemployment, is trying to cut down on the number of foreigners in Israel, leaving farmers without workers.
Last week, the Labor Ministry was forced to reverse a decision to send home 4,000 foreign workers after citrus growers staged a violent demonstration in front of the Prime Minister’s Office.
Humanitarian considerations also cost. For example, the Palestinian Authority owes the Israel Electric Company and the Bezeq telephone company millions of dollars, but service is not likely to be cut off because of the hardship it would cause.