The comments by Saeb Erekat, Palestine's chief negotiator and a member of Abbas's Fatah group, highlighted a growing power struggle between the rival Palestinian groups.

Talking to reporters on Saturday in the West Bank city of Ramallah, Erekat said that evidence for the scale of the economic problems came from research by his own office, the Negotiations Affairs Department.

He said: "This economy is on the verge of collapse. The figures are extremely critical. The government must move to deal with this unprecedented crisis."
   
According to Erekat, Palestine's gross domestic product (GDP) is projected to fall to $2.9 billion in 2006 from $4.04 billion in 2005.
   
"We are revealing these figures on how the economy is collapsing not to score points but to deal with the crisis," he said.

Yahya Moussa, a Hamas lawmaker, said: "They destroyed the economy because it was built on the basis of international aid and Israeli goodwill gestures."
   
Talks on a coalition government, which might have led to an easing of the international embargo, collapsed because Hamas and Fatah could not agree on the terms.
  
The political tension has been exacerbated by an economic crisis since Western powers cut aid to the Palestinian Authority to push Hamas into recognising Israel's right to exist, renouncing violence and accepting past peace accords.
 
Abbas wanted an agreement that would have at least implied recognition of Israel. Hamas, whose charter calls for Israel's destruction, said it would never recognise Israel, even implicitly.

Abbas is under pressure from some Fatah leaders to get rid of the elected Hamas administration.