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Condoleezza Rice met with the Palestinian Authority finance minister, who is in Washington to discuss how to get around banking laws that ban dealings with the P.A. government. Salam Fayyad told reporters he was meeting Tuesday with David Welch, the top State Department Middle East envoy, when the U.S. secretary of state walked in and joined the discussion. Israelis will not deal with Fayyad because he is part of a government that is headed by Hamas, a terrorist group that does not recognize Israel’s right to exist. Rice’s policy is to meet with non-Hamas members of the government. Fayyad, a moderate independent who earned praise for fighting corruption during his previous tenure as P.A. finance minister from 2002 to 2005, said he has “made progress” in discussions with U.S. and other officials on how to get money to the Palestinian Authority despite U.S. laws penalizing banks that deal with terrorist groups. Fayyad said the international ban on dealing with Hamas paradoxically has more than doubled international aid to the Palestinian areas, as the international community strove successfully last year to prevent a humanitarian crisis after Hamas took power. But Fayyad said the ban has eroded institutions he used to fight corruption and mismanagement in his prior stint. “There was a state of institutional degradation,” he said. “That led to the re-emergence of a lot of the problems I thought I had solved,” including centralized oversight over public spending.

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