Hamas: Palestinian Government Is Broke

(CBS/AP)  The Palestinian Authority's coffers are empty and the new government is struggling to find money to pay tens of thousands of its employees, new Palestinian Prime Minister Ismail Haniyeh told his Hamas-led Cabinet at its first meeting Wednesday.

The United States, Europe and Israel are withholding aid to the Hamas-led Palestinian Authority, because the group refuses to renounce violence and recognize the Jewish state.

Meanwhile, Israel's president will ask Ehud Olmert to form a new government, an official said Wednesday, tapping him to be the next prime minister and putting him in a position to carry out his plan to withdraw from parts of the West Bank and draw Israel's final borders by 2010.

But Olmert's Kadima and the liberal Labor Party command only 47 seats in the 120-member parliament, reports CBS News correspondent Robert Berger, so Olmert will need to bring religious parties into the government that are lukewarm to the pullout. That means it will probably be a couple of years before the withdrawal plan gets into high gear.

In other developments:

Prime Minister Ariel Sharon on Wednesday underwent surgery to reattach a piece of his skull, a day after the procedure was delayed because of a respiratory infection, hospital officials said. Doctors removed the piece to operate on his brain after his Jan. 4 stroke.

Half a million chickens in Gaza must be slaughtered because of exposure to bird flu, which will add to the problem of food shortages in the impoverished coastal strip, United Nations officials said on Wednesday. Bird flu has been discovered at five poultry farming locations in Gaza since the virus was detected in the area on March 22.

Hamas is sending mixed signals. Palestinian Foreign Minister Mahmoud al-Zahar says the Palestinian people seek peace with all their neighbors. The phrase was used in a letter to U.N. Secretary General Kofi Annan. Palestinian officials describe the letter as conciliatory, but, Israel was not mentioned by name.

"The Palestinian Finance Ministry has received an entirely empty treasury in addition to the debt of the government in general," Haniyeh was quoted by his office as telling the Cabinet at the start of its session. "We are going to do our utmost as a government to pay the salaries of the Palestinian Authority employees despite the cash crisis that we are facing."

A pledge of financial aid to the Palestinians, made at last week's Arab Summit, is insufficient, Haniyeh said at a news conference after the cabinet meeting.

He said his government is in touch with Arab leaders "to discuss the economic problems we are facing and to propose plans to develop our economy."

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