Q&A: New Palestinian Finance Minister on Hamas

Salam Fayyad just might have the worst job in the West Bank. After warring Palestinian factions Hamas and Fatah reached a power-sharing deal in Mecca, Saudi Arabia, last month, the 55-year-old economist agreed to take over as the new government's finance minister. A former World Bank official who did his graduate studies in Texas, Fayyad —a leader of the Third Way Party—is respected as a reformer by the international community. But he's also stepping in at one of the roughest periods in recent Palestinian history. Israel and the United States have offered no signs that they're likely to lift the economic boycott that has been in place since Hamas won power a year ago. Last year Palestinian GDP fell by 6.6 percent—its steepest ever decline. As he prepared to take office, Fayyad spoke to NEWSWEEK's Kevin Peraino in Ramallah. Excerpts:

NEWSWEEK: How are you sleeping these days?
Salam Fayyad:
You tend to wake up in the middle of the night. It's not easy. I know it's not easy. In my own way, I have reconciled these challenges. What helps me sleep is the knowledge that I'm doing the best I can. But yes, sometimes I wake up. Out of worry.

[Hamas co-founder] Mahmoud Zahar once told me that he asked you to do this job a year ago, and you said no.
Things didn't really get that far. They talked to me, for sure. I met with Zahar and his team. We had two sessions. At the time, there were a lot of fundamental differences in terms of their platform and what we thought was necessary. I didn't feel like there was a clear vision about how we were going to manage. I felt they were misdiagnosing the problem. I didn't think they had given it enough thought. Our conclusion was that we couldn't join.

So what changed your mind?
A year in office humbles you [Hamas.]  Being in government is not an easy thing under the best of circumstances. Anyone who would approach this with an excessive dose of confidence is foolhardy. That's one factor. Also, now I think there's a better understanding of what's required to make this happen. There was complete lawlessness, internecine fighting, sliding closer to civil war—this is something I don't take lightly. What's different this time is Mecca. The accord gives us a better chance than the status quo ante.

Don't you risk becoming a scapegoat for Hamas if you can't turn things around?
It's a problem, the problem of expectations. There are expectations that the problems will disappear. This is an enormous challenge.  But this is not to say we should sit on our hands and wait for the perfect alignment of the stars. When have the stars ever been aligned over the Middle East?

The Americans must have begged you not to take this job.
I don't know if one can really say this. The U.S. is not known to be shy. I'll leave that to them. I've always had a good, constructive relationship with the U.S. It's not something I'm at all defensive about. I like the way the system operates in the U.S. They have a political system that works very well. I look at the U.S. as a model.

Is there anything you think that Hamas has done well over the past year?
The past year has been very difficult, actually. It was an extremely difficult period. The state of public finance has suffered and suffered badly. There has been a reversal of many areas of reform. Transparency—there's been a major decline there. Extra-budgetary spending re-emerged. Getting a handle on what's been going on becomes more difficult. It's the job of the treasurer to know what's going on. None of this has happened. We need to fix the system in a hurry.

What exactly needs to be done?
We need to reconstitute a single treasury account—an address where all the money comes. I'll never say: "It doesn't matter how we get money, as long as we get it." The Ministry of Finance should be the financial center.

With the Sunni-Shia rivalry intensifying regionally, can you play Iran and Saudi Arabia off one another to drum up funding?
"Play" is not a word I will use. I don't want to play with anything. No playing games. We're too small for that.

Israel is still withholding about $55 million each month in Palestinian customs receipts. Can you make the books balance without that money?
This is a very important source of revenue for us. It makes up two-thirds of our revenue collection. I never think of anything as a lost cause. You can compensate for the loss of that money, but only for a while. This is not something we can do forever.

How effectively has the temporary funding mechanism that was set up by the European Union worked?
Clearly, by putting this together they were trying to prevent a humanitarian disaster. It prevented a total calamity. They refer to it as " T.I.M."—but they forget the first letter stands for "temporary." It's like any other attempt to bypass the Minister of Finance. The Ministry of Finance has to be the address—on the receipt side and on the expenditure side. In the absence of that, no one is in control. There's no central authority.

How long can you survive if the sanctions continue?
On our own, we bring in $15 to 20 million per month—compared to a need of $160 million per month. Survival depends on how successful we are in bridging the gap. Clearly, you can't go long with 10 percent of what you need. That's all we have control over—just 10 percent of our need. I'm a realist, and one cannot look at that as a sustainable situation.

Have you been lobbying Hamas leaders to modify their platform—to renounce violence and recognize Israel in order to meet the conditions of the Quartet [the United Nations, European Union, Russia and the United States]?
To me, this is a done deal. This was done back in 1993. It's an important part of history. It was entered into by the P.L.O., which is the sole representative of the Palestinian people. No government has the power to revoke that. The government simply doesn't have that authority. That agreement stands.

Still, that logic doesn't seem likely to satisfy Israel or the United States.
I know this is really the crux of the matter. Everybody knows the debate is about this. But you do not keep on validating something that has already been validated. If you keep on validating it, it tends to undermine the validity of what you're trying to validate. I'm not here because of the glamour of the job. When you feel you're a matter of national consensus, you cannot but be flattered. What else can one do but step to the plate and try to deliver? They want a minister of finance—they're going to get one!