THE economic fallout from Israeli restrictions in Palestinian territories is "deeper and broader" than imagined, with unemployment reaching 50% and poverty in Gaza at 70%, according to the UN's Mideast envoy.

Terje Roed-Larsen urged Israel to ease the restrictions - and called on both parties to resume peace talks as the only viable solution to the Mideast impasse.

Roed-Larsen released what he said were the first international statistics on the Palestinian economy since Israel reoccupied major Palestinian urban areas in the spring as a response to suicide bombings.

"I am deeply disturbed by the figures," he said in Jerusalem.

But I am not surprised, given the iron grip that Israel has imposed on the West Bank. "Aid cannot fill the gap, but without it the economy would collapse. Against this backdrop, and before the eyes of the world, the Palestinian civilian population is scrambling to survive."

"We have to break through this central dilemma," Roed-Larsen said. Humanitarian, economic, political and security issues must be negotiated at the same time, he said, or ceasefires will be destined to fail.

Israel has imposed curfews and sealed off much of the West Bank, severely restricting the movement of goods and people. Residents of six of the eight major urban areas in the West Bank are confined to their homes, often for days at a time.

He said the curfews and closures have pushed up unemployment in the West Bank in the second quarter of 2002 from 36% to 50%. Unemployment in Gaza, he said, has remained steady at 50%.

According to UN figures, poverty defined as per capita consumption of £1.30 or less a day is 70% in Gaza and 55% in the West Bank.

Meanwhile, Israel's Supreme Court has ruled that it is legal to expel relatives of Palestinian suspects from the West Bank to the Gaza Strip, but only if they pose a security risk.

The decision by a special panel of nine judges backed Israel's moves to deter would-be attackers, and rejected the concerns of many human rights activists.

Human rights lawyers say they constitute collective punishment and violate international law.

The Palestinian Authority may file a complaint with the UN Security Council and the International Criminal Court.

Earlier, the Supreme Court, unanimously upheld the expulsions of Intisar and Kifah Ajouri, sister and brother of Ali Ajouri, a member of the Al Aqsa Martyrs' Brigade militia, who allegedly sent a pair of suicide bombers to Tel Aviv on July 17.

The court said Intisar and Kifah Ajouri had advance knowledge of the attack.

Human rights lawyer Leah Tzemel, who represented two of the petitioners, said she feared the decision could be used by Israel as a tool for the transfer of populations from the West Bank to Gaza.

The coastal strip is fenced in, and much easier to control than the West Bank, with its easy access to Israel.

In mid-July, Israel began demolishing family homes of terror suspects, also as a deterrent. Since then, the military has razed more than two dozen homes.