The Palestinian Monetary Authority said on Saturday that banks in the Gaza strip do not have enough money to pay government wages in December.

That was a major blow to Palestinians who hoped to be paid in time for the major Muslim festival of Eid al-Adha, which gets underway on Sunday.

Celebrations were expected to be muted this year as no Palestinians could access their bank funds.
Israel has blocked cash shipments since October.

It was one of a series of sanctions Israel imposed on Gaza since the militant group Hamas seized control of the Gaza Strip in June 2007.

Gazans still waited outside banks on Saturday, including the branches of the Bank of Palestine and Arab Bank, in the hope of withdrawing some money.

One Palestinian man said the closures meant he could not buy his children any special treats or toys as the holiday approaches.

"I will stay in the house during the holiday and will not leave it. They (my children) are being denied the chance to celebrate the holiday, they are being denied milk, and are being denied happiness. We are not even able to buy them toys."

Palestinian Monetary Authority head Jihad al-Wazir, warned that Gaza's banks may collapse if Israel does not allow new cash into the territory.

"By preventing the liquidity from entering into Gaza, Israel really threatens to totally destroy the banking sector as well as what is left of the economy and this would potentially have what we call, in the banking or what we call in the regulatory, what we call systemic failure."

The Palestinian Monetary Authority says it has asked Israel let it ship 140 million shekels, or 35 million US dollars, from its West bank headquarters to Gaza but has so far not received an answer.

Israeli shekels are Gaza's main currency but stocks have been running low after Israel stopped new cash from entering Gaza.

Israel says it would control trade crossings into Gaza until Palestinian militants stop firing rockets into neighbouring Jewish communities.

Israeli PM Reacts to Rocket Attack

Meanwhile, Israeli Prime Minister Ehud Olmert responded on Sunday to rocket attacks fired from the Gaza Strip.

Ehud Olmert said that the Israeli government will formulate Israel's position based on a guarantee that the situation will not continue.

"Absolute responsibility for these violations is on the terror organizations. The state of Israel has no intention to accept it. "
Israel imposed a blockade on Gaza after Hamas took power last year, only allowing in humanitarian aid, fuel and some commercial goods.
The blockade tightened in early November after an Israeli incursion into Gaza set off Palestinian rocket fire at nearby Jewish communities.