Israel stops funds to Palestinians

President Mahmoud Abbas said yesterday that funding restrictions by Israel and the United States following the formation of a Hamas-led government had plunged the Palestinian Authority into a "financial crisis".

"Unfortunately, the pressures have begun and the support and the aid started to decrease... therefore we are currently in a real financial crisis," he told reporters in Gaza.

Israel's Cabinet had decided to make permanent a halt to monthly transfers of some $50 million to the Palestinian Authority after Saturday's swearing-in of the Parliament, led by Hamas, which is sworn to the Jewish state's destruction.

The US, Israel's biggest ally, has also asked the Palestinian Authority to return $50 million in aid to ensure it does not reach Hamas, which crushed Mr Abbas's long-dominant Fatah faction in a January 25 election and holds 74 seats in Parliament.

Mr Abbas said Palestinian officials would discuss the issue with two US envoys who are set to arrive next week.

He also said he would meet with Hamas leaders today to discuss forming a unity Cabinet and his call in a Parliament speech for the government to recognise past peace deals with Israel and commit to pursuing statehood through talks.

"I would like to listen to them directly and to know what their positions and opinion are," he said.

Hamas had swiftly rejected Mr Abbas's call after the speech. The group says it want to avoid confrontation.

Ismail Haniyeh, Hamas's choice for Prime Minister, said earlier that "everything will be on the table" during the talks. Mr Haniyeh, 43, is widely viewed by Palestinians as a pragmatist who has forged good relations with rival factions.

"We want to avoid any sharp debate especially while the (Israeli) occupation refuses to recognise Palestinian rights and refuses to recognise the agreements signed with the (Palestinian) Authority," Mr Haniyeh said.

Hamas spokesman Sami Abu Zuhri said that today leaders would meet heads of other factions, including militant groups, in a bid to form "the largest national coalition possible".

Washington and its allies have urged nations to boycott Hamas, which has masterminded nearly 60 suicide attacks against Israelis since the uprising began, unless it disarms and recognises the Jewish state and past peace deals.

But Russia has said it would invite Hamas leaders for talks in Moscow. Mr Abbas said the world should "not punish the Palestinian people for their democratic choice".