UPDATE 1-Palestinians reject economic solutions from 'punitive' U.S.
* Protesters demonstrate in West Bank, Gaza
* Officials say Trump aid reductions create hardship
* Cuts seen as pressure on Palestinians to resume talks
* Trump recognised Jerusalem as Israel capital in 2017
* Some hit at Palestinian leaders for boycotting meeting (Adds Palestinian in Bahrain, and PLO criticising him)
By Rami Ayyub and Nidal al-Mughrabi
RAMALLAH/GAZA, June 26 (Reuters) - Palestinian leaders accused the Trump administration of punishing them with one hand and offering to reward them with the other, as protesters turned out in the West Bank and Gaza on Wednesday to demonstrate against a U.S. economic peace plan.
At a U.S.-led conference in Bahrain U.S. President Donald Trump's son-in-law Jared Kushner urged Palestinian leaders boycotting the event to think outside the "traditional box" and consider the $50 billion plan to boost the Palestinian and neighboring economies.
But Palestinian officials said it was Trump who had inflicted further hardship on Palestinians, cutting hundreds of millions in aid to humanitarian organisations across the Israeli-occupied West Bank and Gaza.
"If the U.S. is so concerned about Palestinian well-being, then why did they carry out these punitive measures against us?," senior Palestine Liberation Organisation official Hanan Ashrawi said in Ramallah.
"Why did they target Palestinian infrastructure? Why did they stop scholarships to Palestinian students?," she asked.
In August last year, Washington announced an end to all U.S. funding for the U.N. agency that assists Palestinian refugees. The U.S. was UNRWA's biggest donor by far up to that point, giving it $364 million in 2017.
And in February, the U.S. Agency for International Development (USAID) ceased all assistance to the Palestinians, to whom it provided $268 million in 2017.
The U.S. cuts were widely seen as a way of putting pressure on the Palestinian leadership to re-engage with the White House, which it has boycotted since Trump recognised Jerusalem as the capital of Israel in 2017.
"The same team that cut 350 million dollars of aid to refugee camps ... (goes) to Manama to say we have a brilliant plan to bring Palestinians a new chance, a new opportunity," Chief Palestinian Negotiator Saeb Erekat said on Tuesday in Jericho.
"Why would Palestinians say no to such (a) plan?," he added, mockingly.
GULF APART
Neither the Israeli nor Palestinian governments are attending the event at Manama's luxury Four Seasons hotel, where international bureaucrats enjoyed cocktails and delicate pastries, mingling with Arab businessmen sporting gold Rolex watches.
More than 1,500 km (930 miles) away in Gaza, where over half of the enclave's two million people live in poverty, Palestinians criticised the Arab businessmen who attended for siding with the United States and Israel.
"Capitalists do not think of the poor," said Abdel-Rahim Nateel, 62, who spent most of his life in the Beach refugee camp in northern Gaza.
"Let them come and give aid to the hungry people, make projects, ask Israel not to attack us... let them give us our state on the 1967 borders and we do not want anything else from them."
Several thousand Palestinians demonstrated in Gaza on Wednesday, burning posters of Trump and his close ally, Israeli Prime Minister Benjamin Netanyahu. "No to the conference of treason, no to the conference of shame," read one banner.
In the Israeli-occupied West Bank, demonstrations against Bahrain were light for a second day. Some Palestinians voiced a sense of exhaustion about peace efforts and promises of cash and prosperity.
"This conference is just like all others from the past, Arab conferences, American conferences. All of them have been at the Palestinians' expense," said Hamdallah Qasem, 72, who lives in Ramallah.
Their own leadership was not exempt from criticism, however. At an Israeli military checkpoint separating Palestinian villages from the neighbouring Israeli settlement of Givat Zeev, several Palestinian day labourers said President Mahmoud Abbas was hurting the local economy by boycotting the conference.
"If he was struggling like the rest of our people, maybe he would participate. As long as boycotting doesn't hit his wallet, he will never change his position," said Nasser, who declined to give his last name for fear of retribution.
Some Palestinian businessmen did go to Bahrain. The only one to speak at the event was Ashraf Jabari, from Hebron, who has worked closely with Israeli settlers.
"We as businessmen are not involved in politics. We call for cooperation between us and the Israelis because they are our neighbours,” he said. "They own factories and companies and their economy is strong."
Asked about Jabari during her press conference, the PLO's Ashrawi was scathing. "I have seen a handful of collaborators, and to see the Americans trying to give a collaborator a platform, as the ideal Palestinian, or the Palestinian of choice, is quite complimentary to the Palestinian people as a whole," she said.
"We've been living under occupation and under extremely difficult and adverse conditions and have not succumbed or become a nation of collaborators. So to have one or two exceptions proves we are a people of dignity." (Reporting by Rami Ayyub in Ramallah and Nidal al-Mughrabi in Gaza, Editing by Stephen Farrell, William Maclean)
