After Israeli authorities decided Sunday to freeze Palestinian tax money worth 30% of the Palestinian Authority’s budget and impose sanctions on labor and products, criticism of the freeze erupted both within Israel and from various international parties.
Reserve general Danny Rothschild, a former coordinator of Israeli activities in the Palestinian territories, said "it is not in Israel’s interests for the Palestinians to be immersed in misery.  Images of starving Palestinian children would be disastrous for us." he said.

The concern expressed by Rothschild, that starving children would be bad for the ‘image’ of Israel, was not the only thing worrying Israeli business leaders.

Sever Plotzker, the chief economic commentator for the Israeli Yediot Aharonot newspaper, said the use of sanctions was wrong-headed.  "Collective punishment is no response to terrorism, while sanctions which are imposed as a result of a democratic election risk doing ourselves harm," he said.

In fact, in business with the Palestinians, the Israelis manage to make a great deal of profit: the annual trade surplus for the Jewish state in its dealings with Palestinians is around 1.5 billion dollars.  This, combined with the fact that the Gross National Product (GNP) of Israel is higher than the combined GNP of Egypt, Lebanon, Syria, Jordan and the Occupied Palestinian Territories (according to US State Dept. figures), have led business leaders in Israel to consider the ‘cheap labor pool’ in the Palestinian territories a very profitable asset, and one that they are hesitant to lose.

In the Gaza Strip and parts of the West Bank, the unemployment level has reached levels of over 70%, many of the unemployed being workers who formerly crossed the now-closed borders into Israel to work.

The tax money being withheld by Israeli authorities is, in fact, Palestinian tax money — Israel collects customs for imports to Palestine, ostensibly because the Palestinians don’t have their own port. The money is generally collected at Ashdod port. Israeli authorities take a portion of the tax money and then give the remainder to the Palestinian Authority — although in times of tension, withholding these funds from the Palestinian Authority has been one of Israel’s tactics of ‘collective punishment’ upon the Palestinian people.  In addition, Israel returns to the Palestinians part of the VAT (value-added tax) it collects from Palestinian workers.

Instead of demanding the release of their tax money illegally being seized by Israel, Hamas leaders vowed to seek funding elsewhere.  The European Union, while having labelled Hamas a ‘terrorist organization’, has yet to decide on whether it will withhold funding from the Palestinian Authority.  The U.S. government decided overwhelmingly to withhold the $400 million/year it had promised the Palestinians, while continuing to sponsor Israel with $6 billion/year.  

Sweden offered some emergency stop-gap aid money on Monday to help Palestinians deal with the financial crisis. "The humanitarian situation in the West Bank and Gaza Strip has worsened," the Swedish International Development Cooperation Agency (SIDA) said in a statement on Monday, adding that it would provide 50 million kronor (5.3 million euros, 6.4 million dollars) to the United Nations’ aid programs there.  Peter Lundberg of SIDA’s humanitarian unit blamed Israel for the Palestinian financial crisis, saying, "According to the fourth Geneva convention, the occupying power has a particular responsibility to support and ensure the human dignity of the occupied.  Since Israel is not living up to its responsibility under international law, large parts of the Palestinian population are now completely dependent on international humanitarian aid".

Russia’s Foreign Minister Sergey Lavrov said Monday that Moscow would continue to send “urgent aid" to the Palestinians, and Hamas leaders hinted Tuesday at the possibility of accepting aid money from Iran.

"With respect to the challenges that we have ahead of us, Iran’s role in the future of Palestine should continue and increase," Meshal said in a joint press conference in Tehran with Iranian Foreign Minister Manouchehr Mottaki

The fact of dire Palestinian poverty and malnourishment has led many to criticize last week’s statement by Dov Weisglass, a senior adviser to Israeli Acting Prime Minister Ehud Olmert, who helped draw up the economic sanctions, was quoted last week as saying Palestinians “will feel as if they have been on a visit to a dietician. They will become thinner, but they won’t starve to death.”

Israeli columnist Gideon Levy editorialized on Weisglass’ statement that, "The proposal to put hungry people on a diet is accepted here without shock, without public criticism; even if only said in jest, it is incomparably worse than the Danish caricature. It reflects a widespread mood that will usher in cruel, practical measures. If until now one could argue that Israel primarily demonstrated insensitivity to the suffering of the other and closed its eyes (especially the stronger classes, busy with their lives of plenty) while a complete nation was groaning only a few kilometers away, now Israel is also making jokes at the expense of the other’s suffering."