Wed Jul 4, 2012 11:21am EDT–(Reuters) – Past the Israeli sentry towers blackened by firebombs and the entrance to a refugee camp emblazoned with posters of rifle-clenching militants, downtown Ramallah sparkles.
The scars of an intractable conflict and occupation melt away: cafes bustle with smartly dressed patrons, water-pipe smoke perfumes the air and basslines from trendy clubs shake the night. New model BMWs ply leafy avenues beneath villas and tall apartment blocks sprout from the West Bank hills.
But it’s more mirage than miracle.
“Thank God for loans,” said Ibrahim el-Far, owner of the newly-opened branch of the upscale Italian cafe chain Segafredo Zanetti in Ramallah, the Palestinians’ commercial capital and headquarters of their government in the Israeli-occupied West Bank.
Growth in the West Bank is concentrated in Ramallah and in real estate and services even as many sectors like agriculture and construction languish.
Government spending and living on credit at all levels of Palestinian society is rampant and, as the euro zone crisis has shown, may prove to be the economy’s undoing.
Bank lending for personal consumption in the Palestinian territories has risen five-fold in the last two years to $417 million. Total credit for cars alone accounts for a further $119 million, according to the Palestinian Monetary Authority.
“If you’re immersed in troubles, why not try to live well, have night life and good coffee? If we’ve been slapped once by occupation, the slap from the credit bill won’t hurt as much,” El-Far said.
Aid for the donor-dependent Palestinian Authority (PA), which exercises limited self-rule in the West Bank under interim peace deals with Israel, has slowed to a trickle.
Salaries for a swollen public sector again cannot be paid in full this month. The productive base for the economy is shrivelling while unemployment climbs along with poverty.
An economic crisis has deepened – growth is down from a peak of 9 percent in 2010 after the lows of the Intifada to 5.4 percent in the first quarter of 2012 from the same 2011 period…Read More>>