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Dr. Ramzi Halabi, an expert in economic affairs and lecturer at Tel Aviv University, said that any decision to cancel the compensation insurance system for Israeli banks that deal with Palestinian banks will hit the Palestinian economy and undermine the connection between the two banking systems.
The compensation insurance system aims to protect and compensate Israeli banks in the event they are exposed to lawsuits and accusations of illegal financial transactions.
Israeli Finance Minister Bezalel Smotrich wants, behind halting dealings between Israeli and Palestinian banks, to strike Palestinian banks.
The decision of the Israeli Minister of Finance to cancel the compensation insurance system threatens to collapse the Palestinian economy and cause the Palestinians to starve in the West Bank, similar to the famine they are currently suffering in the Gaza Strip due to the war that Israel has been waging for about 6 months.
Halabi pointed out - in an interview with Al Jazeera - that it is not possible to separate the Israeli economy from its Palestinian counterpart, noting that dealing in shekels - for example - has become a normal thing in areas of the Palestinian Authority.
He said, "This is a system that the Israeli Minister of Finance is trying to undermine," adding that according to the agreement concluded in 1994 (Paris Economic Protocol 1994), there is a commitment by Israel to deal with Palestinian banks and give them sufficient guarantees to carry out their work.
Halabi continued, "Now, under the pretext of supporting terrorism, money laundering, and other accusations, Smotrich is trying to attack this agreement."
The economic expert considered that the reason behind the Israeli Finance Minister's step is "political and related to punishing the Palestinian side, especially since Smotrich represents the extreme right-wing government that supports the settlements and religious parties."
The Israeli economic newspaper The Marker had warned that if Smotrich’s decision was implemented, this would cut off the artery of financial dealings between the Palestinian territories and Israel and the Palestinians would stop using the Israeli currency (the shekel), and this would leave the Palestinian Authority with no choice but to demand that the world allow it. By minting and issuing its own Palestinian currency, which may constitute the beginning of global recognition of the Palestinian state.
Regarding whether the Palestinian Authority can issue its own currency, economic expert Ramzi Halabi said, “Without international support, especially from the United States and the World Bank, the Palestinian Authority cannot issue a local currency.”
He added that a Palestinian currency cannot be issued “without having a reserve of gold or other reserves to ensure that it is dealt with at the global level and grants it legitimacy (legal) and economic value.”
Source: Al Jazeera