JAMES WOLFENSOHN, the international envoy to the Middle East, has resigned and issued a warning of the dangers ahead if the West cuts everything but humanitarian aid to the Palestinians.

Mr Wolfensohn, a former head of the World Bank, also cautioned that the UN, charities and humanitarian organisations will not be able to fill the gap if the Palestinian Authority collapses under financial pressure. Speaking in Washington after he ended his posting as envoy to the Quartet on the Middle East — the UN, the US, the EU and Russia — Mr Wolfensohn said: “It would surprise me if one could win by getting all the kids out of school or starving the Palestinians. And I don’t think anyone in the Quartet believes that to be the policy. I think that’s a losing gambit.”

Mr Wolfensohn stepped down on Sunday because of restrictions in dealing with the Islamic militant group Hamas, which dominates the Palestinian Government. He said that recent promises of aid from Arab states would provide only temporary relief to the Hamas-led Palestinian Authority, which has been unable to raise the $130 million (£71 million) a month it needs to pay 160,000 civil servants and keep services going.

He cautioned that if Israel continued to withhold authority tax revenues and maintain its restrictions on the movement of Palestinian trade and workers, by 2008 74 per cent of Palestinians would be living in poverty and 47 per cent would be unemployed. He echoed earlier warnings that fortifying NGOs could not replace the apparatus of the Palestinian Authority if it collapsed.

He also questioned whether the West wanted to bring about the collapse of the authority after spending billions since 1993 to establish it as the cornerstone of a viable Palestinian state. “Will we now simply abandon these goals?” he said. His report was also gloomy about the failure of a deal brokered last year by Condoleezza Rice, the US Secretary of State, to increase the flow of goods through the Karni crossing.

Gaza’s only goods terminal has been closed 50 per cent of the days that it has been scheduled to operate.

The Quartet met in New York yesterday to discuss whether it should replace Mr Wolfensohn. Meanwhile, Israeli officials indicated that Ehud Olmert, the incoming Israeli Prime Minister, plans to meet Mahmoud Abbas, the Palestinian President, after visiting Washington this month. It would be the first meeting between Israeli and Palestinian leaders for more than a year.

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