US warns short term Israel banking waiver won’t solve Palestinian economic crisis

Top US officials have warned Israel that its short term extension of cooperation between Israeli and Palestinian banks will only create more economic turmoil for Palestinians. In a joint statement, US Secretary of State Antony Blinken and Treasury Secretary Janet Yellen said the one month extension approved by Israel would result in “another looming crisis” by the end of November. They urged Israel to approve at least a one year extension to prevent a dire economic situation in the occupied West Bank.

The banking cooperation waiver allows Israeli banks to process payments in Israeli currency for Palestinian services and salaries linked to the Palestinian Authority. Without this, Palestinian banks would be cut off from Israel's financial system. However, Palestinian territories are already facing economic hardships according to the World Bank, especially in Gaza where GDP declined significantly last year following Israel's military offensive.

Blinken and Yellen stressed the one month term approved by Israel creates too much uncertainty for international banks operating in the region as well as Israeli businesses in the West Bank. Most importantly, ordinary Palestinians would suffer the consequences of such a short term solution. They believe a longer term waiver is needed to avoid a full blown economic crisis. Israel's Finance Minister had signed off on the extension after cabinet approval, but the US sees this as merely postponing an even bigger problem down the road. With living conditions in Palestine continuously worsening, all sides will need to cooperate to find a sustainable path forward.