Palestinians face economic ruin as Hamas names cabinet

Ismail Haniyeh, Hamas' choice for Prime Minister, has been presenting his cabinet to Mahmoud Abbas, the Palestinian President. After Fatah and other parties defeated in the January elections declined to join a national unity government, Hamas filled all the key posts.

Mahmoud Zahar, an outspoken Gaza-based Islamist, was expected to serve as Foreign Minister, and Omar Abdel-Razeq, a West Bank economics professor recently released from an Israeli security prison, as Finance Minister. Their inclusion will make it harder for US, European and other foreign donors to go on subsidising the Palestinian treasury.

Israel predicted that Mr Haniyeh's government would be a "pariah regime" if Hamas did not recognise Israel, renounce violence and honour previous agreements. Mark Regev, a Foreign Ministry spokesman, said: "They have decided to conduct themselves outside the norms of international legitimacy. Most governments in the world will not be dealing with them, including Israel. That's their choice, and they will have to deal with the consequences."

Ghassan Hatib, Planning Minister in the outgoing administration, warned that the Palestinian Authority might collapse if donors stopped delivering aid. "If the PA is not able to fulfil its financial obligations," he said, "the public might feel that they don't need it. If the PA stops paying salaries, the employees will no longer be willing to continue their work. Health, education, welfare and other systems will collapse." Mr Hatib, a political scientist who is returning to a teaching post at Bir-Zeit University near Ramallah, contended that Israel would then have to fill the vacuum. This would include going back into the Gaza Strip, from which it withdrew troops and settlers last summer. "Under international law," he said, "Israel has to fulfil its obligations as a belligerent occupation. Even after the disengagement, they kept Gaza under siege. It's still occupied."

One in four Palestinians in the West Bank and Gaza Strip depends on government salaries. James Wolfensohn, a former World Bank president charged with co-ordinating aid to the Palestinians, warned recently that the territories would descend into chaos if aid was cut and salaries not paid.

Some Fatah luminaries urged Mr Abbas to resign and dissolve the PA, but his spokesman, Nabil Abu Rudeina, said the President believed he should give Hamas a chance to get its government in place. However, other Fatah officials expected Mr Abbas to continue pressing Mr Haniyeh to adopt more flexible policies.

One immediate humanitarian crisis, over the passage of food and other supplies into the Gaza Strip, appeared to have been resolved yesterday. Israel had closed the Karni freight terminal after receiving what it said were warnings that armed groups were planning attacks there. The Palestinians rejected an alternative crossing point at Kerem Shalom inside Israel.

After an emergency meeting at the US embassy in Tel Aviv, Saeb Erekat, the chief Palestinian negotiator, told The Independent: "We have agreed to use Kerem Shalom to bring goods from Egypt into Gaza. Egypt has agreed to provide everything we need." The UN had reported earlier that flour stocks in Gaza were exhausted. Most bakeries had closed, while others were rationing bread, the staple food for 1.3 million Palestinians there. The Karni crossing, the last remaining entry point for wheat imports, has been closed since 1 January.