With skepticism rife over a Fatah-Hamas rapprochement and the Hamas demand to replace him, Palestinian Prime Minister Salam Fayyad, the man credited with energizing the movement toward statehood and the man Western governments want holding the PA’s purse strings, discusses the pending issues with Friedson Friedson, President and CEO of The Media Line news agency, at his Ramallah office. Below is the first of two sessions between Prime Minister Fayyad and Ms. Friedson.

Friedson: Mr. Prime Minister, thank you for taking the opportunity to speak with me and The Media Line.

Fayyad: My pleasure.

Friedson: Is there going to be a unity government comprised of Fatah and Hamas?

Fayyad: Well, I’m hoping that as a matter of fact, sooner rather than later. We Palestinians can have – at long last – one government that is able to run the affairs of the Palestinian people both in Gaza and the West Bank. I personally view that as an essential first step toward re-establishing unity. I have always maintained that the state of Palestine which we are seeking cannot and will not happen unless our country is re-united -- and one government is a key instrument of getting there. We just cannot keep going in the way we’ve been going for four years now: separated; separate governing processes; unable to get together physically; having lots of responsibilities there; wanting to discharge them more fully and adequately toward our own people. It just can’t continue. This is really most unnatural. We must see this operation come to an end. Now, in terms of the makeup of our government, that is what has been discussed extensively in various forms of dialogue which I hope can conclude sooner rather than later. This process has been going on way too long in my humble opinion.

Friedson: Will Salam Fayyad be able to continue as prime minister if there is a unity government?

Fayyad: You know, on the basis of what has transpired and most recent contacts especially between the two main factions, Fatah and Hamas, it is no secret that excluding me from the possibility of being the prime minister in the next government was something that was a major issue and topic of discussion and consideration in that direction. Now, I myself have always considered that this should not be an issue, and that as far as I’m concerned, I am not now and I will never be and I can never accept being in a position of even being just thought of as an obstacle in the way of getting us there, in terms of getting the county united again. And most recently and ahead of the most recent round of negotiations which took place in Cairo, and well before that, I actually called on the factions to agree on a consensus choice other than the existing prime minister -- other than me -- with a view to making absolutely clear that statements and speculation as to me being the obstacle or impediment were completely unfounded and that they should really be free to go ahead and do that. That really is my position. What is really important to us is to come to the point where we can have that government – one government – and immediately the important thing is to think about what that government is going to do. This government that is going to run the affairs of the Palestinian people up to the point we have elections – that’s another important issue which I think should be definitely finalized in terms of dates for elections and all because it’s really high time for our people to have the opportunity to have their say in the form of inclusive, transparent, open elections – we must be allowed to do this and we must allow our people the opportunity to do this. It’s not going to be just basically a mere caretaker up until the election. That government should really begin to do serious work to reunite the country. It’s easy to say, “reuniting the country,” reuniting institutions and people. What that means is quite complex and requires a lot of serious effort and that government requires a lot of support in order for it to be able to do these things and for it to be able to make inroads into the reconstruction of Gaza which is overdue. So a lot of challenges; a lot of tasks and that’s what I believe we should be focused on rather than this debate which really is a bogus controversy so far as the identity of the next prime minister. I think that should be dispensed with. There are a lot of qualified people out there and all that is required is that there be agreement and consensus on one; we should move on.

Friedson: Having said that, the word on the street is that you might run for president.

Fayyad: I have not considered anything in politics beyond what I’m doing right now. It is a uniform point of view of anyone who has followed my career until now and what I have been doing for more than 40 years; this would not really come as a surprise. I have just described to you the complexity of the task of the government that is going to take over in the run-up to elections and I hope this is something that is not just talked about but is something that will actually happen. I say this from the point of view of somebody who knows first-hand under these difficult conditions – highly complex conditions – domestically, regionally and internationally – as well. Given all of that, you just cannot think of anything else but what you’re doing. What I am being completely focused on is to be able to continue to chart these difficult waters; build on the progress that we’ve been able to achieve in various fields of government in terms of deepening our readiness for statehood; continue to provide support for our political activity internationally. These are really difficult challenges, so, no, I have not and I will not be thinking about anything but what I’m doing.

Friedson: Your presence has allowed Western governments to provide aid to the Palestinian Authority. So let’s just say you did leave the government as the prime minister. Won’t a sizeable amount of [international] support be placed in jeopardy?

Fayyad: I hope not. I think over the past few years, and this probably is or should be one of the key reasons why we have this much support and international confidence, if you will. I’m really personally flattered by all of this, but at the same time I believe it’s a reflection by and large of the progress that we’ve been able to make in institutionalizing governance processes including in the important area of monitoring finances. If the donors have confidence and faith, it’s not so much, I believe, in the fact that there is x, y or z running the show now. It’s a direct consequence of them having assurance that there are mature governance processes in key areas of government including, importantly, public finance. And so therefore I hope that would not happen. This is far too much of a responsibility, a burden, for anyone to continue to think of himself as the address through which the money, assistance, aid can go only. Exclusively. And I would really regard it, to be honest with you, as a failure on my part if it ends up being the case. I shouldn’t be talking in terms that extend beyond what I consider to be new modesty, because that’s who I am. But if I would think in terms of, well with hesitation I say the word “legacy” – I would really not want it to be my legacy on whose shoulders lies the whole responsibility of being the sole address through which, in which, the international community has confidence when it comes to assisting the Palestinian people or Palestinian Authority…

Friedson: So how do you view your legacy?

Fayyad: It is one of institutionalizing things. It is one of basically converting all energies that we have at the individual level as well as collectively into one part of national effort that is really capable of projecting the kind of true, real, genuine readiness for the state of Palestine that is going to happen; that I really have set out from the beginning as a goal, as a compass for everything that we really do. That’s really the most important thing. So it is progress toward the goal of institutionalizing all of these processes and I believe that is what matters.

Friedson: Mr. Prime Minister, placing your role in the next government aside, American legislators from both parties are warning that the United States cannot fund a Palestinian government that includes Hamas because it’s on the terror list. How iron-clad do you see this stipulation as being?

Fayyad: When we talk about one government, and I mentioned among other things that number one, it is important to have that; and number two, to discuss the makeup of that government and what it should be like, it’s platform, we touched a little bit on the tasks of that government. I do not believe that our friends in Congress would disagree with what I said about the need for us to have one government. No one can because it is, for me, a straightforward point of logic for us to want to see our country re-united. On the basis of that same logic, I see no difficulty and come to the conclusion that this cannot but be the universally-shared conclusion because that state of Palestine – in order for it to happen – must have Gaza as a component. We Palestinians can’t have a state without Gaza. And to the extent that a two-state solution is not only a Palestinian interest, but a regional interest and an international interest, there cannot but be a convergence of views on the need for our country to be reunited. This said, I think it’s incumbent on us Palestinians to really try to manage our own affairs in ways that would not interfere with our capacity to interact effectively with the international community including the United States and especially the Congress of the United States. It’s incumbent upon us to really find a way. I believe the important thing – and I believe it would be really important not to get engaged in some categorization of what might happen and characterization of that government as being [a] factional government of this color or that color or the rest of it. But really to concentrate more on issues that matter maybe more on a level of priority. For example, when it comes to matters of platform – tasks for this government – would it not really be a major consideration that this government, or one of its key tasks, is to oversee the implementation and observance of a doctrine of non-violence? I believe this is a major, major task for the government…

Friedson: Do you believe fundamentalism within Hamas can actually go beyond this?

Fayyad: Let me tell you: What I’ve just described to you, the doctrine of non-violence, is something we attach a greatest deal of importance to. I personally believe in the immense power of non-violence. But it is generally true that this approach, this doctrine, is more broadly shared today in Palestine than at any point before. I think we should take advantage of it and try to formalize it. Therefore, I say, if you have the prospect or possibility of having a Palestinian government, a key task of which is to oversee the implementation of such an important doctrine, would not that represent a major advance or improvement relative to status quo or status quo ante? My answer is, “Yes.” It’s a major improvement relative to what we have. If we ignore other elements, would that government be ideal? I’d say, “No.” But there’s hardly an ideal government anywhere in the world for that matter. I’m someone who looks at the realm of what is possible. What is practical. What is pragmatic and how we might be able to move. A guiding principal, or litmus test, if you will, is whether or not by moving in such-and-such direction we’re not we’re paving the way toward improving the situation. Whether the day after is now going to be better than the day before. In other words, whether we’re going to be better in regards to the status quo is the yardstick by which I measure things. Are we assured that such government is going to be perfect from every other point of view? The answer is no. But my answer is, “Let us begin. Let’s create conditions that are better tomorrow than they are today and build on that. Create a new dynamic: a Palestinian Authority that’s able to function in Gaza.” Being able to enforce, observe and implement a doctrine of non-violence throughout the occupied Palestinian territory is a major advance in being able to formalize what has now become a broadly shared conviction in this doctrine of non-violence. I believe that it is very important to formalize that and for that to become a key ingredient for the platform of the government. This is how I look at things. Now, if we don’t get that, then I myself would say that would be a case of too many missing ingredients. It will be a case of too many things that we don’t have. So I would say it’s important for us to take note – take good note – of the opinion of the international community, but it incumbent on us, too, to explain ourselves. I believe that the international community is reasonable…

Friedson: But if you cannot get them – Hamas – to adopt to non-violence, then what would happen?

Fayyad: I have just described to you what I believe would be absolutely essential in terms of the platform of that government, in terms of its key tasks and responsibilities. And if that is not really agreed upon, if that doctrine of non-violence is not a key ingredient in the platform of that government, then again I say, it will be from our own point of view, a case of too many missing ingredients.

Friedson: Hizbullah is also on the terror list and controls 21 out of 30 cabinet seats in the Lebanese government. Yet, the United States provides aid there. Are the situations comparable? Do you see this as a reason to believe that aid will continue notwithstanding the threats to cut off support?

Fayyad: It is way above my pay grade to engage in cross-border comparisons. I’ll just confine myself to what is possible, reasonable, do-able on our side; and I just described to you, Felice, what is our point of view; what I believe is absolutely essential from our point of view relative to our own objective. Basic and most fundamental of our objectives – what is that? To have a state of our own. What does that mean and what does it require? It requires functional security. Functionality of security requires that the state and its agencies is the address and the state – and only the state – will have purview over security matters.

Friedson: Speaking of obligations, you yourself have criticized Arab governments for failing to make good on pledges to the Palestinian Authority. If the United States and Western governments suspend aid, do you feel you can rely on the Arab governments to fill in the gap?

Fayyad: We have problems now in terms of aid flows. We have an interruption and we have so far an overall flow of aid that’s been less than programmed for this current fiscal year 2011, and what we got of it did not always come in a timely way, which complicated our task and precipitated a financial crisis, which at one point during the year, or twice, made it impossible for us to pay salaries. Not to mention our failure to meet other important obligations to the private sector, vendors, suppliers. This is a major problem for us. To me, the issue is really not to look for other sources of funding in order to overcome the difficulties we face with some sources. Whether they are in the region or outside the region. The solution to me lies in stepping up our own efforts in attaining self-reliance and in the meantime reducing substantially on our reliance on aid. We have made a good deal of progress over the past few years, specifically since 2008 toward reducing our dependency on aid and reliance on it. In numbers, in fact, the aid allocated to us to help us with current expenditure has declined from $1.8 billion in 2008 to about $1 billion this year. This is a significant decline. In GDP terms, it’s a 60% decline from 2008. Actually, under current baseline for financial policy, we’re projecting a couple percentage points more reduction in the deficit of the Palestinian Authority. We’re not looking for other sources to make up the difference. What we’re looking for to make up the difference is ourselves. We asked ourselves, “Can we do more? Can we go beyond the original base line?” And our answer was, “We must.” We must find a way to substantially reduce the deficit in 2012 beyond the level that was planned on the original baseline and we’re doing it. It is my firm expectation. Based on the strength of measures that we are contemplating and we are about to phase in. We are going to be able to substantially reduce our level of deficit in a way that should make it the last year in which we’re going to need external financial assistance for current budget support for current expenditures. That’s a major achievement. It will be yet another sign – a very important sign -- of the advanced state of maturity of governing ourselves; of the level that we have reached.

Friedson: What do you say to those who warn that because of the political situation fiscally, everything can collapse?

Fayyad: Well, fiscally, everything is already collapsing. Not can or will. It is collapsing already under the heavy weight of the suspension of the transfers of our revenues that the government of Israel collects on behalf of the Palestinian Authority. We are fast approaching the point of being completely incapacitated by this, and I really mean it. Now we cannot move checks as low in value as $5,000 and $6,000 without making a special effort with the banks. We really are on the verge of being completely incapacitated by this measure by the government of Israel. Now, those revenues which the government of Israel transfers to us are revenues it collects on our behalf under the agreement that regulates economic and financial relations – the Paris Protocols, which go back to 1994. Under the terms of that agreement, Israel – without any condition or qualification – is to transfer on a monthly basis money it collects on our behalf under that agreement. That should not be subject to any conditions of any kind. It’s not in the agreement that Israel could resort to such measures.

Friedson: Worse case scenario you envision happening?

Fayyad: I’m realistic. You know, in theory some might say that you should look to others to come up with the difference. But realistically, what is it we’re talking about? We’re talking about an amount of money that comprises about two-thirds of our revenues – about $100 million to $110 million per month. I just told you the order of magnitude. I told you our budget deficit for 2011 is about $1 billion. So figure we’re talking about depriving us of about $100 million a month of our revenues. That would have doubled – it’s been happening since January of this year – our financing requirement. Now, if we could not come up with $1 billion in external assistance, how can we even begin to think that we can come up with $2 billion? So it’s wholly unrealistic to expect that the withholding or suspension of transfer of money from Israel is something that can be compensated for by donor assistance. As a matter of fact, I can tell you that there is nothing we can do by adjustment that can begin to make compensation for the withdrawal of that money. Worse case scenario, I will go back to what I just told you. This was not meant to be a dramatization or exaggeration at all. This would incapacitate us completely. You’re taking away from us two-thirds of our revenues. It is difficult for me to see how that can be compensated for by external assistance given the difficulties we have experienced in getting much less by way of external assistance. Furthermore, one would be hard pressed to think of adjustment measures that we could take that would really make the adjustment for the withholding of that money. We’re talking about $100 million per month. This is major. In principle, it is possible. In theory, it is possible. In reality, how realistic is it going to be given the orders of magnitude? Makes it unlikely and makes it difficult for me to think that it will be possible to deal with this problem by looking for money from other sources. You know, we have been living a hand-to-mouth type of existence, living in a crisis mode for more than a year and a half. I know Palestinian finances. The state of Palestinian finances is something of which I have intimate knowledge of since the inception of the Palestinian Authority and from various angles in different capacities from long before I joined the Palestinian Authority in 2002. I can tell you with absolute certainty that the Palestinian Authority has never faced a financial situation that is more difficult than the one it is facing now. When I say we’re on the verge of becoming completely incapacitated, I really mean it literally. This is how difficult it is. This is not something you’re going to be able to resolve by having a little more external assistance. The only way it can be resolved is by the government of Israel doing the right thing and that is to live up to the agreement we have -- the one that governs our relationship in money and finance. Continued failure to resolve this issue should rightly cast serious doubt about the capacity of the political process to deal with the more difficult issues that are to be negotiated between us and the Israelis. The international community, with all of its influence and its involvement and the fact that it’s been providing us with lots of support to help us with our capacity building and with our effort to get ready for statehood; if with all that standing the international community cannot convince the government of Israel to do the right thing when it comes to the money that should be transferred unconditionally, how much faith can we really have in the ability of the international community to do the heavy lifting that’s necessary to facilitate the political process between us and Israel adequately, effectively in a way that can produce an outcome?