RAMALLAH, Palestinian Territories: In the wake of a UN status upgrade last year, the Palestinians are busy printing State of Palestine letterheads and stamps, but they have never been less able to pay their bills.

Last November 29, Palestinian president Mahmud Abbas smiled broadly as the UN General Assembly took the historic vote that upgraded the Palestinians to non-member observer state, but the move has had costly consequences.

It was opposed by both the United States and Israel, with the latter opting to suspend its monthly transfers of tax and tariff revenue collected for the Palestinian Authority (PA) in the wake of the decision.

That has plunged the PA's finances -- shaky at the best of times -- into chaos, forcing prime minister Salam Fayyad to beg Arab nations to make up the shortfall by activating a "safety net" worth $100 million a month.

The money was intended to ensure the PA could continue to pay its thousands of employees' salaries, which make up a large part of the $240 million a month the government needs to stay on top of its obligations.

But the promised money has not been forthcoming. Last week, Saudi Arabia announced it would chip in $100 million (75 million euros) in a one-time donation, but other Arab countries have not come forward.

The situation has created tension on the ground. PA employees are still owed half their November salaries and all of their December pay.

On January 13, the Arab League announced it would dispatch a delegation headed by its secretary general Nabil al-Arabi and accompanied by Fayyad to try to drum up more of the promised "safety net" from Arab donors.

"When the Palestine Liberation Organisation announced that it would go ahead with seeking observer state status, the battle intensified with the United States and Arab donor aid to the PA declined," political analyst Abdelmajid Suleim said.

"The only explanation for the financial crisis is that the Palestinian people and its leaders are paying the price for disobedience to Washington," he added.

Economist Nasser Abdel Karim lays some of the blame on the Palestinian leadership, pointing out that financial sanctions from Israel and Washington had been expected after the UN bid.

"The Palestinian government expected economic difficulties due to the decision to go to the UN, but it did nothing to prepare," he told AFP.

Despite the budgetary blues, Abbas this month gave orders for work to begin on new passports, ID cards and driving licences reading "State of Palestine."

Deputy interior minister Hassan Alawi said that there were practical barriers to putting such orders into practice.

"We're still under occupation," he said. "We have the ability to deliver a Palestinian passport, but the Israeli side will not accept their use."

The PA is also taking the battle to its foreign representations, with foreign minister Riad al-Malki telling AFP that all official correspondence will now carry a "State of Palestine" letterhead.

And telecommunications minister Safaa Nasreddine announced the launching of the first "State of Palestine" stamp, which will be distributed to Palestinian embassies and representative offices.

In a statement, Nasreddine predicted "a long battle with the Israeli side to translate into reality Palestine's upgrade to the rank of state at the UN."

The first State of Palestine stamps will be printed in Bahrain, but similar ones for local use are not expected in the short term, the minister said.

"Israeli permission is unfortunately necessary, before and after their printing," she said.