Finance Minister Smotrich Pushes Cabinet to Approve Decision Supporting Palestinian Banks Despite Prior Opposition

Finance Minister Bezalel Smotrich brought a cabinet decision to extend a government guarantee framework that facilitates the operation of Palestinian banks through Israeli banks, despite his earlier promises to dismantle this mechanism. The decision, approved on July 13, 2026, allows Israeli banks to act as intermediaries for Palestinian banks in international financial transactions, with the Israeli state providing legal indemnity against potential lawsuits or fines related to money laundering or terrorism financing risks.

The cabinet discussion revealed significant internal dissent, especially due to Smotrich's absence from the meeting where his own proposal was approved. Several ministers, including Orit Struck from Smotrich's party, sharply criticized the move. Struck expressed disappointment, stating, "We are reviving the Palestinian Authority," while National Security Minister Itamar Ben-Gvir condemned the decision and urged Struck to demand Smotrich reverse it, asserting, "I would never revive the Palestinian Authority."

The government defended the extension as necessary to prevent the economic collapse of the Palestinian Authority, with Cabinet Secretary Yossi Fox explaining that the state does not want the Palestinian Authority to fail. The framework was initially set to be canceled by Smotrich about a year ago following European sanctions against him and Ben-Gvir, but the recent cabinet vote reversed that stance.

The controversy highlights tensions within the ruling coalition, with ministers openly criticizing Smotrich for both the policy and his absence during the vote. Minister Zeev Elkin pointed out that Smotrich, as party leader, is responsible for the ongoing extension of the framework, despite public opposition from some party members. The decision ensures continued financial activity for Palestinian banks, which lack direct access to the global financial system and rely on Israeli banks as intermediaries.