"The minister of finance has a difficult task before him and I want to offer him encouragement and as much support as I can give," de Soto said as he arrived for the talks.

 

Engagement

 

The EU and UN contacts followed a meeting on Tuesday between a senior US diplomat and Fayyad, an independent with close ties to the White House and Mahmoud Abbas, the Palestinian president and Fatah leader.

 

"I think the EU will be a catalyst, engaging the Palestinians through dialogue rather than enraging them through sanctions"

Marwan Bishara, Al Jazeera's Middle East analyst

By holding the talks the US broke ranks with Israel, which has called on other countries to disregard all members of the Palestinian unity cabinet established on Saturday between Fatah and Hamas, an Islamist party that does not formally recognise Israel.

 

The meetings marked the re-establishment of limited engagement between the Palestinian government and the Quartet of Middle East mediators - the United States, the European Union, the United Nations and Russia.

 

"This is part of our endeavour to end the siege," said Mustafa al-Barghouthi, the Palestinian information minister, referring to a year-old ban on direct aid to the Palestinian government from Western powers.

 

US and Israeli officials say the embargo, imposed after Hamas was elected to power in January last year, remains in place.

 

Ehud Olmert, Israel's prime minister, has said there should be no dealings with the Palestinian government until it meets the Quartet's demands to recognise Israel, renounce violence and accept existing interim peace deals.

 

Dialogue encouraged

 

Marwan Bishara, Al Jazeera's senior political analyst, said the future of sanctions has been threatened by the EU and UN contacts with the new Palestinian government.

 

"For all practical reasons, the wall of sanctions is crumbling down because three of the Quartet members - Russia, the EU and the UN - have shown all sorts of positive signs toward the new [Palestinian] government," he said.

 

Bishara said that the EU talks with representatives from the new unity government suggested a change in strategy.

 

"I think the EU will be a catalyst, engaging the Palestinians through dialogue rather than enraging them through sanctions," he said.

 

Also on Wednesday, Hamas-led police forces killed a Fatah fighter and injured four others, in the first serious clash since the unity government was formed on Saturday.

 

Fatah said members of Hamas's Executive Force fired a rocket-propelled grenade at the home of a senior al-Aqsa Martyrs Brigades commander in the northern Gaza Strip, killing a member of the group and injuring the others.

 

Hamas confirmed that the clash had taken place but said its men opened fire after being shot at by al-Aqsa fighters.