Aid plan draws muted Palestinian response

RAMALLAH, West Bank, June 18 (Reuters) Palestinians gave a muted welcome to an international emergency aid plan bypassing the Hamas-led government.

''We hope for an expeditious implementation,'' Palestinian chief negotiator Saeb Erekat said, after President Mahmoud Abbas called the ''temporary mechanism'' a good step but inadequate.

Under the plan agreed by the United States, European Union, United Nations and Russia yesterday, money would flow by early July to cover Palestinian health and utilities costs.

But a crippling overall funds freeze, imposed by international donors after Hamas, an Islamic militant group dedicated to Israel's destruction, came to power in March, will remain in place.

Some 165,000 Palestinian government employees have gone unpaid for the past three months. Hardship has deepened in the occupied West Bank and in Gaza amid inter-factional violence, raising international fears of a plunge into total chaos.

Hamas, which won election in January, has refused to meet US, EU and Israeli demands to recognise the Jewish state, renounce violence and accept past interim peace deals.

The temporary aid, bypassing the Hamas administration, will provide essential supplies to the health sector and payments to health-care service providers, utilities including fuel, and cash allowances to meet the basic needs of the poorest sections of the population.

An EU spokeswoman said the EU's executive had proposed providing (126 million dollars) for the programme.

The international peace brokers, known as the Quartet, said they hoped Israel also would contribute. Israel has been withholding tax revenue transfers, about 55 million dollars a month, to the Palestinian Authority since Hamas took office.

''We hope the international community will help us by releasing Israeli-withheld funds. This is the key to avoiding a human catastrophe,'' Erekat said.

BYPASSING HAMAS Israeli Foreign Ministry spokesman Mark Regev said Israel would have no comment on the aid plan until it is formally presented by EU External Relations Commissioner Benita Ferrero-Waldner during a visit to Jerusalem tomorrow.

But he said: ''Israel supports international efforts to directly support the Palestinian people that bypass the Hamas government.

''From our point of view, international aid is desirable, but we don't want to see aid strengthening or giving legitimacy to the Hamas government.'' In a challenge to Hamas and in an apparent bid to ease international sanctions, Abbas has set a July 26 referendum over a manifesto envisaging a two-state solution to the conflict with the Jewish state.

While Abbas's Fatah group wants a Palestinian state on land Israel occupied in 1967, Hamas ultimately seeks an Islamic state on all of what is now Israel, the West Bank and Gaza Strip.

A senior Abbas aide, Rawhi Fattouh, said after talks between Palestinian factions late yesterday in Gaza that the groups were close to finalising an agreement on a political platform.

Such a deal could lead Abbas to cancel the divisive referendum vote.

The inter-factional talks have also raised speculation over a possible Palestinian unity government that could weaken Hamas's hold on power and lead international donors to resume overall aid.

REUTERS KD RN1542