According to the World Bank, the Palestinian economy is booming. During 2009, growth in the West Bank reached 8%, although Hamas controlled Gaza saw a more modest development of 1%.

Much of this change has been associated with the reduction in violence directed against Israel. Many remember how at the beginning of the Intifada, 125,000 Palestinian labourers lost their salaries overnight, as Israel was forced to close the border with Gaza. And these were relatively high value jobs, a shortfall which has never been fully made up.

In parallel, Israel’s economy is also doing well today. Yuval Steinitz, the Finance Minister, is looking at 4% growth in 2010. Andrew Stanley, head of the EU Commission in Israel, “said that he is fascinated by the dynamics and resilience of the Israeli economy, which proved to be one of the markets to note the fastest recovery from the global financial crisis.” 

It has been long accepted by all sides of the peace process that Israel will have to help and encourage the Palestinian economy in years to come. Clearly, it has the capacity to do that.

But then comes a catch! The Palestinian Authority (PA) has begun to lead a campaign which boycotts Israeli products, specifically those made in the West Bank.

This policy was kicked off with the official support of Prime Minister Fayyad, back in January 2010. He attended a televised burning of Israeli products, ironically close to the anniversary commemorating Kristallnacht.

This week, the campaign was taken into Arab towns inside Israel, which are also being encouraged not to buy Israeli products.

And there are now moves by the PA to stop all Palestinians working on what are determined as settlements – effecting roughly 25,000 people – and their dependents…and those who they buy goods from.

And that’s the point. It sounds wonderfully politically correct not to “support the enemy”. But there is no spare capacity inside the Palestinian territories to take up the slack. Just look at the Gaza debacle mentioned above. In an agricultural economy with a small population, the fall out will only be painfull. 

None of this furthers the cause of peace. If Fayyad, his cabinet, Hamas and all the rest really want a long term relationship with Israel, it is time for the rhetoric of violence to be replaced by ploughshares. Otherwise, thousands of newly poverty-struck Palestinians will be driven back to hidden stocks of weapons.

Here we go again?