But the largest shortfall is going to be the $55m or so in revenues that Israel collects on the PA's behalf. Israel this week announced that transfers will stop after the new Hamas-dominated parliament convenes on February 18th, even before it forms a government.

The fear is that Hamas may turn to sources the West cannot control. Two weeks ago Hamas was sounding conciliatory, but this week Mahmoud Zahar, one of its hard men, told America to keep its “satanic money”. Hamas leaders are now on a regional fund-raising tour: there is no shortage of donors worldwide who have helped it, and even tided the PA over in previous crises, though for how long they could plug the gap is unclear. America could press Arab leaders and banks not to provide or transfer money, and some might agree, but that would further inflame an already angry Arab street. In any case there are many informal networks—through Islamic charities in various countries, business people, or smugglers—that could let cash trickle through. Russia, which has invited Hamas leaders for talks (to Israel's fury), has a large Muslim population which may offer conduits of its own.

The confusion has also left the donors unsure how to deal with a series of struggles for power within the PA itself. This week the outgoing Fatah legislature defiantly bestowed on Mr Abbas the power to appoint judges to a constitutional court, which could overturn laws: an attempt to declaw Hamas, which would need to drum up a two-thirds majority in parliament to undo it. “It's completely contrary to all the work that we've put into reform and state-building,” says a European diplomat, noting that in Yasser Arafat's time everything was done to weaken the president, “but we're letting them get away with it because it's politically expedient.”

Yet Mr Abbas may not be behind the move; he publicly blocked another proposed law, which would have given him the power to dissolve parliament. Nor does he seem to be encouraging the anti-corruption witch-hunt that began after the election: his attorney-general announced a series of probes (none new), the prime minister's office shows sudden interest in foreign-designed anti-corruption ideas it had ignored before, and lists of targets for prosecution are circulating in the PA.

In fact, such moves seem to be coming not from the top but from officials acting alone, perhaps trying to ingratiate themselves with the incoming government. Hamas has attacked Mr Abbas for appointing Fatah officials to key civil-service posts, but it has been quietly holding talks with top civil servants to ensure their co-operation. “Everything”, says a foreign contractor who works with the PA, “is going green”—the colour of Hamas.

Palestine

A tricky jigsaw

Feb 23rd 2006 | JERUSALEM AND RAMALLAH
From The Economist print edition

Even if Hamas gets less cash for running a government, it may not get weaker

THE slow process of taking over the Palestinian Authority (PA) has begun for Hamas. This week the Palestinian parliament, in which the Islamist movement won 74 of 132 seats in last month's election, was sworn in. Ismail Haniyeh, a Hamas leader from Gazaknown as a centrist within the movement, was named prime minister. He has until March 28th—the same day that Israel holds its own election—to appoint a cabinet. Hamas is now talking to other Palestinian factions, hoping to form a national unity government.

It may yet succeed. Though most in the defeated secular party, Fatah, want Hamas to shoulder the burden on its own in the hope that it will quickly fail, a handful, worried that Palestinians will be the ultimate losers, now talk openly of joining it. Otherwise, Hamas says it will appoint non-political “technocrats” to the cabinet—though how many and to which posts is vague.

Equally unclear is whether this would make Hamas less isolated. Its main opponents, Israel and the United States, have taken harsh steps already. Israel says it will stop transferring the customs and tax revenues it collects on the PA's behalf after the PA government is formed. American legislators voted overwhelmingly (but non-bindingly) to stop all aid as long as the PA is run by a party that calls for Israel's destruction; the United States asked the PA to give back $50m of unspent money from last year. And Condoleezza Rice, the secretary of state, spent this week on a tour of the region, to persuade Middle East governments not to help the PA; Hamas's leaders had been on a regional fund-raising drive shortly before.

But behind the scenes, Israeli decision-makers are in a quandary. Politics in the run-up to their own election is making them sound tough. They may perhaps soften afterwards if the informal suspension of hostilities between Hamas and Israel, which has mostly held for the past year, continues. And the American government, says Nathan Brown at the Carnegie Endowment in Washington, has been “uncharacteristically multilateral in its approach thus far, consulting with allies and avoiding staking out a very strong position.” An even greater sense of wait-and-see prevails among European donors, who remain divided over what level of aid is politically and legally acceptable.

How much does the PA stand to lose? Foreign aid, averaging $1 billion a year for the past five years, comes in three kinds: development aid (such as infrastructure projects), budget support, and humanitarian aid. Development aid will probably be cut, though a lot may well be rerouted—either by paying money directly to contractors, funnelling it through agencies like the World Bank that don't have the same political restrictions as the donor countries, or reclassifying it as humanitarian aid.

The budget will suffer more. Last year some $360m of the PA's $1.9 billion budget came from donors of all kinds, and around $700m from revenues collected by Israel. Humanitarian aid, both American and Israeli politicians have said, should be preserved as far as possible: the aim is to hurt Hamas, not the Palestinians. But $1 billion last year went on paying the PA's 137,000 employees, and their wages support a third or so of the population. The February pay packet was disbursed some ten days late; at the moment, nobody knows where the cash due on March 1st will come from.

A defiant Hamas says it will get it elsewhere. Arab governments, which have helped the PA out in the past, face a dilemma: ignore America's wishes or ignore the rising pressure for democratisation and the growth of Islamist political forces in their own countries. But even if they cave in to the Americans, Hamas has much more experience than Fatah in collecting money through informal networks, charitable donations and the like.

Hamas could also save a lot just by trimming the grossly bloated payroll. According to some reports it plans to reduce the workforce to 100,000. That would be hard, not only because it means throwing thousands of people on to the streets in a struggling economy, but because Hamas will probably want to replace several thousand more Fatah loyalists in the security forces with its own men. But if it succeeds despite the loss of foreign cash, the result will be a PA that is leaner—and meaner.