Louis Michel, the humanitarian aid commissioner, will make the offer to the EU's 25-member states "in the next few days", his spokesman said, adding that the new money would be used for food aid, sanitation, water and health projects.

The European Union is the biggest donor to the Palestinians, many of whom live in poverty, but it suspended direct aid to the government after Hamas took office in March because Hamas refuses to renounce violence or to recognise Israel.

Israel has also slapped heavy financial sanctions on Hamas, compounding a financial crisis that could bring the group down.

The more than 160,000 civil servants on the payroll of the Palestinian Authority, amounting to a wage bill in excess of $120 million a month, have not been paid for two months.

Social services

Hamas has since turned to Arab and Muslim countries to keep it afloat.

About 4.1 million Palestinians are
facing food shortages

"At the moment, 4.1 million Palestinians are facing food  shortages, around 40% of the population," Michel said in an interview in the Friday edition of Belgium's Le Soir newspaper.

He said that "important means" must be mobilised because the  "Palestinian Authority's social services are going under."

Since Hamas swept to power, the EU has been searching for ways  to channel funds to the Palestinian people without putting it in the  hands of the group, which figures on the bloc's black list.

Quartet discussions

Emma Udwin, the chief spokeswoman for EU external affairs, said  that the so-called Middle East diplomatic quartet - the EU, United  Nations, United States and Russia - would examine that issue in New York on Tuesday.

"We will meet quartet partners next week in New York and we will be discussing with them the current financial situation; the needs on the Palestinian side, the ways in which the donor community will react"

Emma Udwin,
spokeswoman, EU external affairs

"We will meet quartet partners next week in New York and we will be discussing with them the current financial situation; the needs on the Palestinian side, the ways in which the donor community will react," she said.

She said that Mahmoud Abbas, the Palestinian president, who has retained the support of the quartet, could play the role of an "interface" between the Palestinians and the international donor community.

Udwin also said the commission has been searching in particular for ways to fund the health and education sectors in the Palestinian territories.

Frozen total

In total, the EU provides around 500 million euros annually to  the Palestinians - half from the commission and half from the  member states.

The overwhelming majority of that money has never been put  directly into the hands of the Palestinian government, and Udwin explained that only 31 million euros was currently frozen.

She said the commission will continue to provide humanitarian aid and try to meet the basic needs of the Palestinian people.