Palestinian finance minister pays partial wages

RAMALLAH, West Bank (Reuters) - Palestinian Finance Minister Salam Fayyad said he made partial payments to Palestinian workers for the first time on Sunday, seeking to sidestep a year-old Western embargo of the Hamas-led government.

The union that represents government workers has brushed aside the partial payments as insufficient and has threatened to call an open-ended strike to demand full salaries plus back pay.

In addition to the money from Fayyad, government workers received "allowances" from a European Union aid programme. Together, the payments totalled about half normal wages.

"Until the financial horizon becomes clear, we're going to pay around half salaries to everyone. We started today," Fayyad told Reuters.

It was not immediately clear how his payments were made.

A senior Palestinian bank executive said Fayyad used an account he controls at the Palestine Liberation Organisation (PLO) to make the partial payments, though that could not be immediately confirmed.

Fayyad had asked the Bush administration to give a green light to donor nations and banks to use the PLO account, allowing him to bypass a ban on bank transfers to the Palestinian unity government.

The Bush administration has yet to publicly issue any formal decision on the PLO account.

The PLO, which has signed interim peace deals with Israel and is led by President Mahmoud Abbas, has not been subjected to U.S. financial restrictions imposed when Hamas won elections last year. But the Bush administration said banks were still reluctant to deal with the PLO, prompting Fayyad's request.