President George Bush ruled out out giving aid to a Hamas government after its surprise election win on Wednesday unless it renounced violence and reversed its stance on Israel. 


"They've got to get rid of that arm of their party which is armed and violent and secondly, they've got to get rid of that  part of their platform that says they want to destroy Israel," Bush said in an interview with CBS News.

 

"And if they don't, we won't deal with them. Aid packages won't go forward." 
   

The US State Department earlier said all aid programmes to the Palestinians would be "reviewed".

 

"To be very clear, we do not provide money to terrorist
organisations," said State Department spokesman Sean McCormack on Friday.


Hamas is classified by the United States as a terrorist group.
   

"We will base our actions on our law and our policies," he added.

 

This year, the United States budgeted no direct aid for the Palestinian Authority, but plans to provide $150 million to the Palestinians through the US Agency for International Development and another $84 million through the UN Relief and Works Agency for Palestinian refugees in the Near-East, he said.
  

Asked whether Hamas participation in a new Palestinian government would imperil aid that goes directly to the Palestinians, McCormack replied: "I guess the short answer is you can't answer that question right now."
  

But, he stressed, "the international community understands that the Palestinian people have humanitarian needs; they're a poor people."

 

Israeli transfers

 

Israel has meanwhile thrown into doubt its willingness to transfer customs revenue to the Palestinians after Hamas's victory in the parliamentary elections.

President Bush wants Hamas to
renounce violence

 

Joseph Bachar, director general at the Israeli Finance Ministry, told the World Economic Forum in Switzerland on Friday:  "We will face practical problems of how you deal with people that call for the destruction of Israel."

   

Bachar was referring to customs and value-added tax revenue that Israel collects on behalf of the Palestinians and which he said was the main source of funds for the Palestinian budget.

   

Mazen Sinokrot, the Palestinian Economy Minister, sitting on the same forum discussion panel as Bachar, said the Palestinian Authority faced a financial crunch as early as next week if Israel withholds the $40-50 million it hands over every month.

 

Sinokrot said the cash transfers in question amounted to "monthly revenues exceeding $40-50 million" and Israel was obliged to pay.

   

"This is not donor money. They have to bring the money, the money for the Palestinian people, they cannot really think otherwise," he told Reuters.

 

"Where these salaries should come from for 135,000 employees?" he said. "If those salaries are not coming, this is a message for violence."

   

Bachar later told Reuters: "There will be a decision next week" over transfers of the customs and tax revenue.

 

Uncertain future

   

Former World Bank chief James Wolfensohn, now a special envoy for Western powers in the Middle East, said the international donors who prop up the Palestinian economy would not keep pumping money in if there was political uncertainty.

 

"The Palestinians are basically bankrupt at the moment," he said.

   

"I don't think there are two or three years left in the international community to finance something that doesn't have hope ... People are not ready to give money to something that they don't know where it's going."

 

The EU is the biggest donor to the Palestinian Authority, with aid of 500 million euros ($612 million) last year - 280 million from the common EU budget, the rest from member states.

   

While EU foreign ministers meeting for regular talks on Monday are not expected to directly threaten aid cuts, a French diplomat said their message would be that a refusal by Hamas to renounce violence and recognise Israel would have consequences.

   

"To be very clear, we do not provide money to terrorist
organisations"

Sean McCormack,
US State Department spokesman

"It will understand that if it departs from these principles, if it says that the EU's demands are unacceptable, if it doesn't need Europe, then it is inevitable that European ministers will draw their own conclusions," he said.

    

Sinokrot acknowledged there were doubts about future funding from the Palestinians' main donors - the United States, Europe, Japan and the Arab world - because of the uncertainty created by the shock Hamas victory.

   

"I think they want to sit and wait to see what is the next step from the Palestinian leadership and the new elected government," he said.

   

Even before this week's election, a 35 million euro tranche of EU budgetary aid to the Palestinian Authority was frozen in a World Bank trust fund in a dispute about the cost of government salaries.