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Last Updated: Monday, 1 May 2006, 15:11 GMT 16:11 UK
Gazan traders fall on desperate times
By Alan Johnston
BBC News, Gaza

A youth takes a nap as he waits for customers at his vegetable shop earlier in April
Gaza shoppers are staying at home as wages are left unpaid
All the shopkeepers on Gaza City's Palestine Street say the same thing - that they have never known such hard times.

These are traders who have been through decades of Israeli occupation and two Palestinian uprisings. They have endured years of chronic instability.

But it has never been quite so hard to make a living in Gaza as it is right now.

In a little shop called "Paris" - selling perfume and fabrics - there was not a customer in sight.

The owner, Eyad Rian, sat at the back, leafing through a newspaper and listening to songs on the radio.

"It's very difficult," he said. "There's no money so nobody comes to buy."

As he spoke the air around him was heavy with the scent of unsold perfume.

Aid suspended

The main reason why business has got so much worse lately on Palestine Street is the new Hamas-controlled government's desperate financial situation.

European Union and American financial aid has been suspended because Hamas refuses to recognise Israel and renounce violence.

We haven't seen times like this before
Eyad Rian,

Israel itself is withholding tens of millions of dollars that it owes the Palestinians.

Up to now the government has not been able pay its more than 160,000 civil servants - whose earnings support about a quarter of the population. And the impact has sent shockwaves through the economy.

"It used to be that we never took less than 300 shekels ($67; 37) a day, but now we don't make even 50," said Mr Rian, whose wife is pregnant with their second child.

"I can't make enough to cover my own expenses - cigarettes and food - so how can I cover the rent?

"We haven't seen times like these before. This is happening not only to me, but to the majority of the shops."

Transfer problems

Hamas has appealed to the Arab and Islamic world to step in and make up for the lost European and American cash contributions.

Man sets out jewellery in window of gold shop
The cuts have hit a wide range of shops hard

And it has had some success. Iran and Qatar have both promised $50 million (27.3m) - nearly enough to cover this month's civil service wage bill.

And Saudi Arabia and the United Arab Emirates and other countries in the region have pledged tens of millions more.

But transferring the funds has proved very difficult.

Palestinian officials say banks have been reluctant to channel the money to Hamas. They fear that if they do they will be subjected to crushing American sanctions.

However the Hamas government says that it is now just days away from overcoming the problem.

There are reports that the idea is to have wages paid from abroad directly into the personal accounts of government employees - without the money passing through the administration's hands.

But many civil servants, who haven't been paid for about six weeks now, will probably only really believe it when they see the cash in their banks.

And there are questions as to how sustained support from the Arab world might be in the longer term. Like the Americans and the Europeans, the Arab League is pressing Hamas to moderate its policy towards Israel.

Workers protesting over aid cuts on 30 April
Unemployed workers have staged protests over the suspension of aid

Meanwhile President Chirac of France has put forward what may be an important initiative.

He has suggested that international donors contribute money to a fund that would be controlled by the World Bank - not the Hamas government. The account would be used to cover the wages of civil servants.

But it is not yet clear whether Washington would agree to ease the pressure on Hamas in this way.

Border closures

Even before the wages crisis set in, Gaza's economy was on its knees. The World Bank has consistently put poverty rates at well over 60% of the population.

If things don't change there will be an explosion - an uprising
Arafat Akeeleh,
Restaurant owner

And for months there have been chronic export and import difficulties on account of Israel's closure of the big cargo terminal at Karni, on Gaza's border.

This has had a particularly devastating impact on the important market garden trade. Millions of dollars were lost in potential winter exports of Gaza's peppers, tomatoes and cut flowers to Europe.

Gazans accuse Israel of deliberately trying to strangle them economically through the border closures.

But the Israelis always said that they were on account of security concerns, and last week Palestinian militants did try to launch a major attack on Israelis working at the Karni terminal.

Back in his perfume shop on Palestine Street, Eyad Rian reflected on Gaza's collapsing economy.

"We can only bear so much," he said. "And then we will explode."

The owner of the next door restaurant, Arafat Akeeleh, agreed.

"If things don't change there will be an explosion - an uprising," he said.

"I am a father. Today I can bring what my son needs, but in four months' time, when there's no salaries? And when he wants milk when he's crying in his mother's arms? What can I do?"

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