Abbas says foreign funds for salaries a must

RAMALLAH, West Bank, May 11 (Reuters) Palestinian President Mahmoud Abbas has said that securing foreign funds to cover the salaries of the Hamas government was key to preventing economic meltdown in the West Bank and Gaza Strip.

The Quartet of international mediators -- the United States, Russia, European Union and the United Nations -- agreed on Tuesday to create the new mechanism for funnelling money to the Palestinians and will run it for a three-month trial period.

A decision is pending on whether some of the funds will go to 165,000 government workers who have gone unpaid due to US-led cut-off of direct aid to the Palestinian Authority since Hamas, an Islamic group opposed to peace with Israel, took power.

''My understanding of the Quartet's decision is that salaries will not be paid. It is still not clear, but if that is the case, the collapse will continue,'' Abbas told reporters yesterday.

''I will continue to urge them to include payment of the salaries to prevent further collapses,'' he said. ''The economic crisis is a snowball that is growing and growing as it rolls, I don't know where it will reach. We have to find a solution.'' It was not clear how the mechanism -- yet to be worked out but which the EU is expected to take the lead on -- would function, but it was expected to effectively bypass the Hamas government and channel funds through Abbas's office.

The moderate Abbas is widely regarded as the best hope of reviving peace talks. He has been at diplomatic loggerheads with Hamas since it crushed his Fatah faction in January elections. Rival gunmen from the groups have engaged in increasingly bloody street battles as the economic crisis has deepened.

But a Palestinian official said Abbas was informed by US officials that Washington opposed paying salaries through the president's office ''since it was the Palestinian government's responsibility to come up with the funds to pay the salaries''.

Abbas has said protocol required that any money paid into his office would end up in the Palestinian government coffers.

''I have no problem with receiving money through my office. I would then transfer it to the Finance Ministry,'' he said.

While it has largely abided by a year-old truce, Hamas has refused to abandon a charter call for the Jewish state's destruction and embrace negotiations on co-existence.

Abbas held out hope for change. ''They (Hamas) can't change from the extreme right to the left immediately, and the world has decided to give them this chance,'' he said.

Referring to the internal violence, he said: ''God knows, are we going to be another Somalia, or worse still?'' REUTERS PDS PM0454