Ismail Haniya offered no solutions to the cash crunch, pledging only to do his best to resolve the crisis and appealing to the Arab world to give more aid to the Palestinians.

"The Palestinian Finance Ministry has received an entirely empty treasury in addition to the debt of the government in general," Haniya told the first meeting of his cabinet on Wednesday.

The Palestinian Authority is the largest employer in the West Bank and Gaza Strip, providing salaries for 140,000 people and sustaining about one-third of the Palestinians.

Omar Abdel Razek, the finance minister, said he is waiting for $80 million from Saudi Arabia, Kuwait and the United Arab Emirates.

"If they pay, and I hope they will, we will be able to pay salaries by the middle of the month," he told The Associated Press.

In a symbolic step, Haniya said the cabinet members would not be paid until the financial crisis is solved.

"We are not going to receive our salaries until everyone from the Palestinian Authority is paid," he said.

Tax revenues frozen

Israel also has frozen the transfer of tax revenues it collects on behalf of the Palestinians.

The US and Canada have already announced they are severing ties with the new government, and the European Union is to decide on its aid programme next week.

"The Palestinian Finance Ministry has received an entirely empty treasury in addition to the debt of the government in general"

Ismail Haniya,
Palestinian Prime Minister

A collapse in the Palestinian Authority would be devastating to an economy where 44% of the population lives under the poverty line of about $2 a day, and nearly one-quarter of the work force is unemployed, according to World Bank figures.

The Hamas government also announced on Wednesday that it was freezing all administrative  appointments made by the previous moderate Fatah administration.

"The government has decided to freeze the naming and the  promotion ... of administrative appointments carried out between  November 20, 2005 and March 2006," said a government statement  released after a cabinet meeting.

In a step aimed at fighting widespread government corruption, the newly elected cabinet also requested its ministers to make  public all their revenues.