>>RAMALLAH -- Palestinians in the West Bank city of Ramallah are struggling to cope with an economic slowdown in the Palestinian territories, spurred by a decline in foreign aid. Many blame the Palestinian Authority and Israel for their troubles.  

Ramallah residents are used to adjusting to the pressures of the Israeli occupation, and the city has been lauded for its economic growth.

But as the region is squeezed economically, some on the West Bank are questioning their leaders in the Palestinian Authority, based in this city.

"I don’t expect any help from the Palestinian Authority. Maybe if a state is established, but as long as the PA lives on funding, it will never get better," said a Palestinian teenager.

"The PA treats the Israelis better than it treats us," said another.

These young men live in Ramallah's Amari refugee camp, home to 7,000 people whose families became refugees in the 1948 war that established Israel.

They are governed by the Palestinian Authority, which relies on foreign aid to meet its budget.  

As the global economy falters, that aid has dropped by half to less than a billion dollars annually.  The authority can't pay its workers on time.

The Omeir family supports three generations and two complete families in this small house.  Nour is their main support. She's a teacher on the Palestinian Authority's payroll and has not received her salary in months.

"The Palestinian Authority is not able to administer correctly," said Nour.

Her husband Nazir is a carpenter.  He has not worked for more than a year since few have the money to pay for his labor.  But he is pragmatic.  

"We need to be better neighbors with Israel. Then we can open the borders for trade," said Nazir.

But like most Ramallah residents, he believes Israeli settlement activity in the occupied West Bank is making  peace nearly impossible.

"The Israelis have put in obstacles because they cannot agree to negotiate over refugees. Since the settlements, all negotiations are deadlocked. The settlements are the biggest obstacles to peace," he said.

Palestinian chief negotiator Saeb Erekat says only Palestinian independence will free the area from hardship.  

The Palestinian Authority plans to press the UN to upgrade Palestinian status to a non-member state.

"We're gonna get it.  We're gonna get it.  We have many nations that will stand tall with us," said Erekat.

But it's unclear how that would affect life on the West Bank.  Business there is disrupted daily by Israel's checkpoints and its restrictions on trade.  

Former Minister for the National Economy Mazen Sinokrot says unemployment, which stands at about 25 percent, is a major threat.  

"Many of our good Palestinians are so depressed because they cannot find jobs. We are in need to create not less than one million jobs in the upcoming eight years. So this is a huge responsibility and challenge for everyone, including the international community," said Sinokrot.

Poverty is growing. If things continue this way, these pre-schoolers will have no future in the West Bank. Almost half of families in West Bank refugee camps are classified as “food insecure” by the United Nations.

For families like the Omeirs, survival comes through barter and loans from friends. And they worry.

"I want things for my children, a promising future, good prospects, and all external sides are not helping," she said.

And that is likely to continue.  Israel is threatening retaliation, possibly cutting off tax moneys owed to the Palestinian Authority, if it actually does move for upgraded U.N. status. And that could make life much worse for Palestinians in the occupied territories.