Lally Weymouth also spoke with Palestinian Prime Minister Salaam Fayyad in Ramallah.

Excerpts:

Q. Did you [think] it was possible to do anything with [Yasser] Arafat?

A. There is hardly anything I did here that was easy. Changing the way business is done in finance in the PA was not easy. You just didn't know where to begin.

Was it possible to do anything with the PA?

Yes, it was. This is fairly well documented. We did quite a few things in a relatively short period of time.

So what did you decide to do?

I knew what was wrong with the system. I wanted to get the basics right. And that's what I focused on. Having one treasury, one financial address for the PA, not several different centers for sending money. Revenues had to go to one place.

How did Arafat accept that idea?

He was accepting of it. Most of the fundamental reforms that were essential for getting the system right . . . happened in my first term as finance minister. They were pretty much done by 2005. . . . We started to do things right and also have one treasury . . . one financial address for the PA. . . . Donors confidence started to rise. They started to send us money directly. The system became transparent. We launched a Web site on which we posted our budget.

The PA was supposed to be so corrupt.

Yes, reform isn't without opposition, of course. You do what you can in situations like this. You move as fast as you possibly can. The program started to acquire a reputation of its own. But then I had the backing. I began to develop a constituency. Then last June there was the violent takeover of Gaza.

And you left Gaza?

Yes. First I served under Abu Amar and then Abu Mazen, beginning in January 2005. And then [in] late 2005 I resigned as finance minister. I ran for elections of the PLC.

Did you get elected?

Yes, I got elected. I wanted to do something different. . . . You know what happened in the elections of 2006. . . .

Hamas?

Yes. Hamas came in and that lasted about half a year. Then I rejoined the government as finance minister in a national unity government in March 2006, which lasted three months. I found the system pretty much in ruins.

After Hamas was elected, there was an international boycott. Donors wanted to take care of the humanitarian needs of the Palestinian people but did not want to do so through the government.

They wanted to extend assistance to the Palestinian people but not to go through the Ministry of Finance. As a consequence of all of this, the system became highly fragmented and there was no single address for spending. So, to answer the most basic question, how much assistance did you get last year, you really don't know. The one thing countries should be able to tell you is how much they received in donations. But a lot of money came in cash to Hamas. Iran gave money to the government. When things do not come through banks, how can you do proper accounting? So for three months we tried our best to fix things. The public finance system was totally in ruins.

Then, the government collapsed and there was the violent takeover by Hamas in June 2007.

Q. When did you become prime minister?

A. In June 2007 I was sworn in.

Do you blame the Americans for pushing the election in which Hamas won?

No. From what I remember, everyone, myself included, pushed for elections to be inclusive. In other words, not to exclude any party.

So how do you explain Fatah's loss ?

The PA [Palestinian Authority] had been around for a long time. . . . There was dissatisfaction with the way the PA had governed. You had a newcomer running against the system. They claim to be clean, they claim Fatah is corrupt.

Is it true that Fatah was corrupt?

The PA clearly didn't manage properly throughout. It does not really have to be a clear case of impropriety for there to be strong public opinion against a sitting authority. The context in which we live, occupation and checkpoints, people don't like that. Another is the failings of the peace process. In the early '90s, expectations were high, but then there was setback after setback.

But when you were sworn in, you spoke out against violence and incitement.. . . What did you say?

Essentially, that the party is over. Places of worship are places of worship. Religion is about tolerance, religion is not about incitement. [Incitement] is not going to be allowed. It was something I did out of deep conviction. It was evident we were not on the right path. We needed to change the mind-set of people in the midst of extreme adversity.

What was the reaction?

They complied. For the Authority to govern, there have to be rules. People have to know what they are.

I heard that you and Israeli Defense Minister Ehud Barak are working on building up Palestinian institutions. Is that correct?

Correct. . . . I want to build toward statehood. I want to create the best Ministry of Finance. I do not want to use the occupation as a pretext or an excuse.

Are you creating a currency and a central bank?

We are doing all of this. . . . But when we started doing this, it looked even more distant because the country was on fire and in a state of disintegration.

Because of Gaza?

The Gaza situation could have spilled over into the West Bank. There was a lot of violence also taking place in the West Bank in the immediate aftermath of Gaza.

Is Hamas still strong in the West Bank?

I wouldn't say that they are very strong, but I wouldn't say that they have no strength either.

How is Palestinian security performing on the West Bank?

Our security performance has improved markedly.

Is the Israeli security working with your security? Is there . . . cooperation?

It's been dead for a long time, to tell you the truth. New realities emerged after spring of 2002, in which the Israelis pretty much assumed authority [for] security in all areas of the West Bank, including areas which were designated PA areas. Israel was not about to give this up. What do you do? Israel says it is taking care of security but it's doing so from its point of view. . . . I asked them what do you think happened to security conditions in the West Bank during the time period when you assumed the authority of the Palestinian Authority? A state of lawlessness has emerged. There was a progressive deterioration in law and order in the West Bank and a state of chaos has actually emerged. How can there be a state of security unless the security is for Palestinians and Israelis alike?

Does chaos exist today?

It's much better. Looking at this situation, I knew we had to assert our physical presence. But the Israelis would not agree to that. I was the one who really wanted to deploy. I really did not hesitate and I do not think it was a mistake and I will do it again.

It worked?

It worked. We started in the most difficult city, Nablus. Poor morale, poor performance. At the same time, you really cannot wait until you get it fixed to begin to provide security service. Security is the most basic of all services.

President Abu Mazen [ Mahmoud Abbas] and Prime Minister Ehud Olmert are conducting peace talks. Is anything going to happen?

They have not proceeded at a pace that's consistent to obtain the objectives set forth at Annapolis. . . . Annapolis set in motion two tracks. The second . . . talks about the need to immediately implement phase one of road map obligations. People forget about that. It's important to me because it preserves the possibility of a two-state solution.

How do the Americans feel about that?

This document was agreed to in 2003. It was about governance, institution building and security.

How do you unite Gaza and the West Bank again? How do you get rid of Hamas?

My starting point is not to get rid of anyone. We have to be accepting of political pluralism.

Is it a democracy when people are shelling Israel?

As soon as there is acceptance by everyone, including Hamas, that there is one authority here and it is the sole address for weapons, there can be a resolution to our conflict. Ultimately our people have to see things for what they are and move away from empty slogans that have brought us nothing but complete calamities. The reason we slid into this complete chaos in Gaza is not so much because there was political disagreement but because there was a channel through which political disagreement or discord translated into disaster and that is militias, outside the purview of the Palestinian Authority.

If they keep shelling Israel, won't the Israelis go into Gaza?

The cycle of violence definitely has to stop. We cannot go on like this. I spoke out publicly against violence from Gaza. Also, we spoke publicly against the disproportionate Israeli response . . . the massive casualties.

It's not really a cycle of violence. It's people in Gaza shelling Israel.

I do not want to be less than 100 percent clear on this. We are against violence from Gaza.

Is it a problem or an advantage for you that you are not in Fatah?

I don't think it really is a plus for someone to be in politics without a party.

Do you want to join?

If I did not become a party man when I was younger, I'm not going to do that now. What I want to do is to give our people a sense of hope and possibility. That's what I want more than anything else. You want your people who are down but not out to begin to think, We can do this. What I really want is to rekindle some sense of ability and capacity . . . . . . Israel itself was not established in 1948, it was declared in 1948. It had the institutions of state before 1948. And that's what I want to do.