UK, France, Germany urge Israel to renew Palestinian banking ties amid fears of economic collapse

The UK, France, and Germany on Thursday urged Israel to renew vital banking ties with Palestinian financial institutions for at least 12 months, warning that failure to do so could lead to the collapse of the Palestinian economy and destabilize the region.

The appeal comes as Israel's indemnification of its banks for cross-border transactions with its Palestinian counterparts is set to expire on Nov. 30, according to a statement by the UK government. It also coincides with Israel's over year-long assault on the Gaza Strip, leaving most Palestinian institutions on the strip little more than piles of rubble.

On Oct. 31, the Israeli government granted a 30-day extension to the banking ties – the shortest yet – raising alarm among European nations and international observers.

"This disappointing decision prolongs uncertainty and endangers the Palestinian economy,” a joint statement by the countries' foreign ministers said.

"Cutting off these banking ties, which Israel has a clear duty under the Paris Protocol to maintain, would create significant economic turmoil in the West Bank, jeopardising the security of Israel and the wider region."

The UK, France, and Germany emphasized that there is no technical justification for withholding a longer-term extension, citing improvements in Palestinian financial oversight.

"We are fully satisfied that the Palestinian Authority has taken significant steps to counter the risks of terror financing, and that financial institutions within the West Bank maintain adequate controls to manage these risks," the statement continued.

"The issue of cross-border payments must not be leveraged to undermine the Palestinian Authority," it added.

The European nations underscored the need for Israel to implement policies that promote financial stability, both internally and regionally.

They urged a one-year extension and called for future decisions on indemnifications to be "transparent, predictable, and de-politicized."

The statement came as Israel's brutal offensive against Gaza enters its second year, having killed over 44,000 people, and its longstanding policy of expanding settlements in the occupied West Bank continues, displacing Palestinians for illegal settlers amid widespread violence by the Israeli settlers.

As it faces a genocide case at the International Court of Justice, Israel faces accusations by many observers that it wants to take over and occupy all of the West Bank and Gaza, depriving Palestinians of their land and making a Palestinian state all but impossible.