U.N. officials on Wednesday issued an emergency appeal for assistance to help Palestinians affected by a worsening financial crisis in the Palestinian territories.  U.N. officials say funds are urgently needed to provide basic services.

U.N. officials say the humanitarian outlook for Palestinians is bleak and will get dramatically worse by the end of the year.  They say a cutoff of government revenues, donor aid and growing violence among Palestinian factions means that the Palestinian economy will shrink by more than a quarter this year. 

Since the election victory of the Islamic militant group Hamas in January, Israel has suspended the payment of about $60 million a month in customs and tax revenue it usually turns over to the Palestinians.  International donors have also cut aid, leaving the Hamas government unable to pay more than 150,000 civil servants.  David Shearer who heads the U.N. office for the coordination of humanitarian affairs in the Palestinian territories says Palestinian government revenues have been cut by 75 percent. 

"What that means is that the key component and the backbone of the continuous reliable payments that have been made into the Palestinian economy have been cut, and that has put strain throughout on huge numbers of people," he said.  "So we are launching this appeal because we think poverty levels are going to rocket up over the coming month."

U.N. officials say they are requesting $170 million in additional assistance from donors above the $215 million they asked for late last year.  So far, the U.N. says it has only received less than half of the original amount requested.  The U.N. says the supplemental aid request will be used for emergency cash and food payments as well as for health care. 

International donors met in early May to try to resolve how to provide humanitarian relief to Palestinians while bypassing the Hamas government, but U.N. officials say it will be some time before a mechanism can be developed to provide that type of donor aid to Palestinians.  Israel also says it is trying to develop ways to release some of the customs and tax revenue it now holds to pay electricity and water bills to keep hospitals functioning, as well as for medicines and other health services.

However, international donors say they will not resume regular assistance to the Palestinian Authority until Hamas agrees to recognize Israel, something Hamas says it will not do.   David Shearer of the U.N. says Palestinians are not on the verge of starvation as a result of the aid cutoff, but in many Palestinian areas life is regressing.

"What you have at the moment is that Palestinians in Gaza for example may move from being entrepreneurial commercially-minded people who cannot get their exports out," he added.  "So Gaza goes from that situation and turns into a beggar economy where essentially they are reliant on outside handouts and food aid, and that is a very undesirable place to be." 

Shearer says another factor crippling the Palestinian economy is an increase in the number of checkpoints and roadblocks that prevent Palestinians from moving around the West Bank, as well as frequent closures of the main cargo crossing point between Israel and the Gaza Strip.  Israeli officials say the roadblocks and restrictions at the cargo crossing point are in response to Palestinian security threats. 

In a further sign of the deteriorating situation in the Palestinian territories, Hamas officials on Wednesday backed away from a previous pledge they had made to begin paying overdue salaries to civil servants, saying they have enough money to pay only about 40,000 of the Palestinian Authority's lowest level employees one month's salary. All other workers, they say, will have to wait.