In the West Bank, where a construction boom has slowed and unemployment is high, discontent has centered on the Palestinian Authority leadership, including the technocrat prime minister, Salam Fayyad, who introduced tax increases and other austerity measures. Analysts say those steps have contributed to plunging approval ratings for Fayyad and President Mahmoud Abbas.
Anger over the measures has combined with long-standing criticism that Fayyad’s strategy of building institutions and improving law and order — widely viewed as successful — have not moved the Palestinians closer to statehood. A bid for recognition at the United Nations is stalled, plans to reconcile the two main Palestinian political factions appear frozen, peace talks with Israel have crumbled, and the Obama administration is not publicly pushing the issue.
Higher taxes and moves to rein in spending on civil servants — a 165,000-strong workforce that is the backbone of the Palestinian economy — seem like an affront, critics say.
“Most of the money is spent on security, and the security is not for the Palestinian people. It is for the world, especially Israel,” said Bassam Zakarneh, president of the Palestinian Authority workers union. “If they say we will cut your salary 50 percent to create a sovereign state, we agree.”
But that has not happened, and now some are calling for the Palestinian Authority — formed as an interim body more than 16 years ago — to be dismantled. Fayyad, an economist who in 2009 outlined a nation-building strategy based on economic development and good governance, said that would be a profound mistake.
“To bring about an end of the Israeli occupation, that was a key motivation,” Fayyad said in an interview. “The other part of it was obvious . . . namely the creation, emergence of a well-functioning state of Palestine. If that’s your objective, then you need to get ready for it.”
The economy, he acknowledged, does not look good. Growth in the West Bank slowed considerably in 2011, and the budget deficit grew to $1.1 billion, according to the IMF. A key problem was a $500 million shortfall in aid from the foreign donors who bankroll the Palestinian Authority, particularly Arab countries.