Kofi Annan, speaking for the Quartet of would-be peace-making nations after their meeting in London on Monday, also said the group must set up a government that is committed to the rule of law, tolerance, reform and sound fiscal management.

Annan said it was "inevitable that future assistance to any new government would be reviewed by donors against that government's commitment" to such principles.

Shortly after Annan spoke, Al-Arabiya satellite channel in the Middle East reported that Hamas had rejected demands to disarm and recognise Israel.

Rejection

Sami Abu Zuhri, the spokesman for Hamas, said: "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."

"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"

Sami Abu Zuhri,
Hamas spokesman

Abu Zuhri said the Palestinian people were being punished for exercising their democratic right.

"The Quartet has punished the Palestinian people for having cast their vote."

He added that Hamas was keen to have good relations with Western countries.

Peaceful life

Condoleezza Rice, the US secretary of state, said on Monday the new government has "an obligation ... to speak to the aspirations of the Palestinian people for a better life and for a peaceful life.

"That peaceful life, the Quartet has reiterated, can be achieved only through a two-state solution that recognises the right of Israel to exist; that is committed to non-violence; that undertakes the obligations of the road map."

Rice says peace can be achieved
through a two-state solution 

The Quartet, which includes the US, Russia, the European Union and the UN, was already on record as saying "there is a fundamental contradiction between armed group and militia activities and the building of a democratic state".

The Palestinian Authority (PA) receives about $1 billion from overseas donors - more than half of which is from European nations.

The rest is a mix of funds from international donor agencies, Arab and Asian governments, and the US, which gave $70 million in direct aid to the PA last year.

Earlier on Monday, Rice ruled out any US financial assistance to a Hamas government.