Unity Government Faces An Uphill Task

BMI View: The Palestinian unity government formed on June 2, which reunites Fatah and Hamas in a single political authority for the first time since 2007, will struggle to improve the Palestinian territories' stagnant economic outlook. The mutual tensions between the two parties are set to intensify in the run-up to presidential elections scheduled for 2015.

The formation of a Palestinian unity government on June 2 marks a symbolic end to the long-running dispute between the rival Fatah and Hamas factions ruling the West Bank and Gaza Strip respectively. The new government will bring together the two Palestinian territories under a single political authority for the first time since 2007, and paves the way for presidential and parliamentary elections scheduled to take place in 2015. Announcing the unity agreement, Palestinian President Mahmoud Abbas declared "the end of division that caused catastrophic harm to our cause".

Yet the deal will do little to improve the Palestinian territories' stagnant economic outlook, with economic activity set to remain undermined by financing constraints and continuing Israeli restrictions on trade and movement. Moreover, maintaining a central government over two geographically separate regions will be a massive challenge, and we are cautious over the sustainability of the reconciliation agreement. We expect several issues to flare up over the coming months, including the question of succession to Abbas; integration of the dual administrations run by Fatah and Hamas; and managing the fallout in relations with Israel.

Unity Challenged By Geographic Separation
Palestinian Territories - Map

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This article is tagged to:
Sector: Country Risk
Geography: West Bank and Gaza

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