Israel says it expects to suspend monthly tax payments to the Palestinian Authority, following last week's landslide win by the Islamic-militant group Hamas in Palestinian legislative elections. The move could cripple Palestinian government finances.

Israeli officials say they are almost certain to suspend the transfer of millions of dollars in customs and tax revenues payments to the Palestinian Authority until they complete a policy review of the current situation in the Palestinian territories.

Ehud Olmert

The review was ordered by acting Prime Minister Ehud Olmert following last week's Palestinian legislative elections, which saw Hamas win 56 percent of the seats in the Palestinian Legislative Council. 

"The whole idea that money would come from Israel and be transferred to the Palestinian Authority if that authority is led by an extremist terrorist group responsible for suicide bombings is almost as if we were to transfer money to have our own citizens killed in suicide bombings. There is no logic to that whatsoever," said Mark Regev, the spokesman for Israel's Foreign Ministry.

The Israeli proposal was immediately condemned by the Palestinian Authority's Economy Minister Mazen Sonnoqrot, who called it grave and irresponsible, saying it will have negative economic and social consequences for the Palestinians.

A spokesman for the Islamic militant group Hamas also criticized the decision saying Israel was trying to steal Palestinian money.

Israel collects millions of dollars in tax and customs revenue on behalf of the Palestinian Authority and was expected to turn over about $55 million to the Authority on Wednesday.

Mark Regev

Israeli spokesman Regev says Israel agreed to the payments under international accords - agreements that Hamas has rejected.

"The transfer of the money, which has been routine, is part of the accords signed between Israel and the PA [Palestinian Authority], part of the Oslo Agreement and the Paris Protocol," said Mark Regev. "Now Hamas, the new incoming leadership on the Palestinian side, say they reject all those agreements - from their point of view those agreements are null and void. So they cannot have it both ways. They cannot say they are against all these agreements and then, at the same time, expect Israel to keep the part of the agreement they want, which is the transfer of funds."

On Monday, the international Quartet behind the roadmap peace plan - the United States, Russia, the European Union and the United Nations - said they would continue to provide humanitarian aid to the government of Palestinian President Mahmoud Abbas. But it said that Hamas, which much of the international community considers a terrorist organization, must renounce violence and recognize Israel, something Hamas leaders have rejected.

Even before the Hamas election victory, the Palestinian Authority was facing a financial crisis. Nearly all of its $1 billion in revenue is devoted to paying the salaries of about 135,000 civil servants. Last year, in violation of international agreements, the Palestinian Authority raised salaries and this year's deficit is projected at $600 to $700 million.