World powers trying to broker Middle East peace said Islamic militant group Hamas must reject violence and recognise the state of Israel or risk losing vital aid when it forms a new Palestinian government.
But the so-called Quartet, made up of Russia, the European Union, the United States and the United Nations, stressed after a meeting in London that international donors would continue to aid the caretaker government of President Mahmoud Abbas, at least until a new government was formed.
The goal was to give Hamas, which won a shock victory in Palestinian parliamentary elections last week, some breathing space to change its policies before forming a new government, possibly within three months, said US and EU officials.
"The Quartet concluded that it was inevitable that future assistance to any new government would be reviewed by donors against that government's commitment to the principles of non-violence, recognition of Israel, and acceptance of previous agreements and obligations," said a statement by the Quartet.
Hamas immediately rejected the conditions listed by the Quartet and said it was up to Israel to change.
"The Quartet should have demanded an end to (Israeli) occupation and aggression... not demanded that the victim should recognise the occupation and stand handcuffed in the face of the aggression," Hamas spokesman Sami Abu Zuhri said.
European Union foreign policy chief Javier Solana told reporters afterward it could take up to three months before a new Palestinian government was formed and vital EU funding would continue at least until then.
"If these conditions are met then we stand ready to continue (to fund the Palestinian Authority)," said Mr Solana. "If they do not change then it will be very difficult," he added.
Last year, the EU gave the Palestinian Authority €500 million.
US Secretary of State Condoleezza Rice, who had been pushing for a strong statement against Hamas from the Quartet, reiterated that the militant group must adapt.
"There are responsibilities which come with governing," she said at the news conference, adding that the Palestinians deserved a better life.
The Palestinian Authority faces a huge budget crunch and the Quartet made clear that, mindful of the needs of the Palestinian people, it would continue to support Mr Abbas's caretaker government.
"It's important to note that we do believe that Abu Mazen deserves to be supported," said Ms Rice, referring to Mr Abbas's nickname.
UN Secretary-General Kofi Annan said if Hamas changed it could hope for engagement with the international community.
"If Hamas... transforms itself from an armed movement into a political party respecting the rules of the game... I think the international community should be able to work with them."
Both Hamas and Mr Abbas, whose Fatah party lost at the polls against Hamas in last week's parliamentary elections, appealed earlier to foreign donors to lift threats to cut vital aid.
Mr Abbas stressed during talks in Ramallah with German Chancellor Angela Merkel that despite Hamas's victory the Palestinians under his leadership remained committed to eventual peace talks and stood by all agreements with Israel.
"I stressed the importance of the continuation of financial and other types of support by the donor countries," Mr Abbas told an earlier news conference. He said such aid was vital for the plan of building a peaceful Palestinian state alongside Israel.
But in Washington, US President George W. Bush reiterated his refusal to deal with Hamas, which has launched suicide attacks against Israel and whose charter calls for the destruction of the Jewish state.
"The Hamas party has made it clear that they do not support the right of Israel to exist and I have made it clear so long as that's their policy that we will not support a Palestinian government made up of Hamas," he said.