On Friday, Ismail Haniya, the prime minister and a Hamas leader, denounced the decisions as "hasty and unjust".

"The world should respect the choice of the Palestinian people," he added.

 

President Mahmoud Abbas said that "the Palestinian people should not be punished for their democratic choice".

By cutting the aid, the US and EU were "punishing all the people, workers and families", he said.


Financial collapse

 

The US and the EU suspended aid to the new Hamas-led Palestinian government on Friday, pushing the Palestinian Authority closer to financial collapse.

 

The US State Department said it would boost humanitarian aid to the Palestinians through United Nations agencies to avoid widespread distress in the West Bank and Gaza Strip, but Washington would not fund an organisation committed to the destruction of Israel.

 

Rice said the Palestinians must
meet the quartet's terms

Department spokesman Sean McCormack quoted Condoleezza Rice, the US secretary of state, as saying that the Palestinian cabinet must meet terms laid out by the Middle East quartet of negotiators comprising the United Nations, the US, the EU and Russia.

"The path back to the road map is clear: Acceptance of the three principles. If it accepts the quartet principles or a new government comes to power that accepts them, funding can be restored," McCormack said.

The three principles are that Hamas must renounce violence, recognise Israel's right to exist and express clear support for the Middle East peace process.

European freeze

 

In Brussels, the European Commission said it had halted aid payments to the Palestinian government.

Abbas, who heads the Fatah movement that recognises Israel, said: "We urge the international community to be understanding and continue to provide aid."

But David Welch, assistant secretary of state for Near Eastern and North African affairs, said: "We believe that Hamas, as a government, is going to have great difficulty meeting the aspiration of the Palestinian people."

 

Facing an immediate financial crisis, Hamas is trying to find ways of paying 140,000 workers employed by the Palestinian Authority.

 

Struggling to survive

 

Hamas has appealed to Arab states and Iran to fill the shortfall, but has not even been able to find a bank willing to handle its finances.

"The Palestinian Authority is responsible for [these services] and therefore donors must keep funding it"

Jeremy Hobbs,
director of Oxfam

Even before the aid cut off, many Palestinians struggled to survive in an economy suffering from widespread poverty, high unemployment and rife with corruption.

 

Israel has stopped turning over about $50 million a month in taxes and customs revenue it collects on behalf of the Palestinians under previous agreements and its banks have begun cutting ties with the Palestinians.

Mahmoud al-Zahar, the Palestinian foreign minister, warned the EU that cutting aid would harm its credibility and could lead to boycotts of European interests in the Islamic world.

Avoiding responsibility

 

Earlier, the European Commission, announced its decision to  suspend 500 million in aid to the Palestinian Authority, to which the bloc has been the main donor since its creation under the 1993 Oslo peace accords.

Diplomats said the European freeze covered all direct aid to the Palestinian government and payment of public employees' salaries with EU funds through the World Bank, but not humanitarian aid through international and non-government organisations.

But the charity Oxfam warned that NGOs do not have the capacity to run health and education services and cutting aid would deprive the Palestinian population of these services.

Jeremy Hobbs, director of Oxfam, said in a letter to the EU: "The Palestinian Authority is responsible for [these services] and therefore donors must keep funding it."