Banking sanctions have prevented the Palestinian Authority from bringing in enough money from Iran and other donors to pay its workforce in full.
 
Israel is also withholding Palestinian tax revenues.
 
Under US law any foreign bank that refuses to co-operate with America in cutting off funding to Hamas could have its US assets frozen and lose its access to the coutry's financial markets.
 
Israeli to be 'freed'
 
Also on Friday, Mahmoud Abbas, the Palestinian president, said that a captured Israeli soldier held by fighters in Gaza will be released soon.
 
Gilad Shalit, an Israeli corporal, was seized last June in a cross-border raid from Gaza into southern Israel.
 

"We are undertaking efforts to free Shalit and these efforts will soon come to fruition. We are optimistic"

Mahmoud Abbas,
Palestinian President

Abbas told France 24 television: "We are undertaking efforts to free Shalit and these efforts will soon come to fruition. We are optimistic. He will be freed soon."
 
However, he gave no specifics and previous comments by him about Shalit have not resulted in the soldier's release.
 
Abbas said there were also 9,500 Palestinian prisoners held by Israel who should be released too, although he said the two issues were not related.
 
The president also said efforts were under way to improve the security situation in Palestine and to free a BBC journalist abducted in Gaza on March 12.
 
Gaza violence
 
Meanwhile, in the Gaza Strip, Hamas and Fatah fighters have clashed again.
 
Friday's gun battle in the town of Khan Younis left at least one member of each faction injured.
 
A hand grenade thrown during the fighting slightly injured a young boy, and the house of a Hamas member was torched.
 
Both sides said the fighting started when a Hamas member posted an Islamist pamphlet near a mosque loyal to Fatah.
 
Tensions are running high in Gaza despite the formation of a unity government on March 17 between the two factions.
 
Fatah leader ambushed
 
Haniya his cabinet would hold a special meeting on Saturday to discuss a new security plan aimed at stemming factional fighting and growing lawlessness within 100 days.
 
But Palestinian fighters ambushed a top union leader as he drove in the Gaza Strip on Friday, moderately wounding the man before fleeing in his vehicle, officials and relatives said.

Your Views

"The new government should show signs of maturity and responsibility"

Husky, Ottawa, Canada

Send us your views

There was no claim of responsibility for the shooting of Ghassem Bayrie, head of the 45,000-member national Palestinian labour union.
 
Bayrie is a prominent Fatah loyalist in the Gaza Strip and has been an outspoken critic of Hamas.
 
He is also close to Mohammed Dahlan, the powerful Fatah leader in Gaza and new interior minister.
 
Shot in the leg Palestinian police said Bayrie, 50, was driving in a union minivan with his family when they were ambushed. He was shot in the leg, and the entire family was forced out of the vehicle before the assailants sped away.
 
Rezek Bayrie, brother of the leader and a union spokesman, said the shooting was part of the "lawlessness and ongoing anarchy" in Gaza.