Hamas appeals to banks to help end funding crisis

RAMALLAH, West Bank, Apr 26 (Reuters) The Hamas-led Palestinian Authority vowed today not to give in to Western financial pressure and appealed to banks to take ''some risks'' and agree to handle the new government's funds.

Palestinian officials and Western aid agencies say the economy could quickly collapse and violence could spread because Israel froze tax receipts and Western nations cut aid to the Palestinian Authority.

Aggravating the crisis, local, regional and international banks have balked at transferring Arab and Islamic donations to the Palestinian Authority, fearing sanctions by the United States which regards Hamas as a terrorist organisation.

''It's not time yet to raise our hands'' and give up, Finance Minister Omar Abdel-Razek said. ''There won't be political concessions (by Hamas) in return for the dollar,'' he told local officials.

Iran, Qatar, Saudi Arabia and Kuwait have pledged emergency funds totalling more than 200 million dollars. But the Palestinian Authority cannot access the money because local, regional and nternational banks have balked at making the transfers.

Bank officials say they fear Washington will impose sanctions on them or deny them access to banks on Wall Street which they rely heavily upon to conduct day-to-day transactions.

March salaries to 165,000 government workers have gone unpaid while April wages are due next week.

The Islamic militant group is sworn to destroy Israel and has rebuffed international demands to recognise the Jewish state, disarm and accept peace deals.

TALKS Abdel-Razeq said the independent Palestine Monetary Authority was holding talks with the central banks of Egypt and Jordan ''in order to find a way out to this issue''.

But he acknowledged he was having trouble solving the banking problem. ''The results are slow but the contacts are still going on,'' Abdel-Razek said. ''God-willing, we will reach soon a good outcome.'' It was not immediately clear what central banks would be able to do to assist the Palestinian Authority. Egyptian and Jordanian banks have extensive operations in the Palestinian territories.

Hamas has been seeking access to foreign funds deposited in Egyptian bank accounts set up by the Arab League to aid the cash-strapped Palestinian Authority.

The Arab League had pledged to transfer an initial 50 million dollars to the authority today but there was no sign of that money arriving.

Abdel-Razeq earlier this week estimated that the Arab League accounts held a total of about 70 million dollars, not including a Saudi pledge of 90 million dollars.

''We understand the sensitivities in which the banks are dealing,'' Abdel-Razeq said. But he added: ''We expect the banks to shoulder their responsibilities and to take some risks.'' He said donated funds had been converted to euros from U.S.

dollars in a bid to get around the U.S. banking restrictions.

''The threats are against the banks dealing in the dollar,'' he said, adding that the Authority could change the funds yet again into Egyptian pounds and Jordanian dinars.

Reuters SHB DB2311