Blair suggests incentives to Palestinians

LONDON, Dec 12 (Reuters) British Prime Minister Tony Blair said on Tuesday he would spell out to Palestinian leaders during a West Asia trip what support they could expect in exchange for recognising Israel, crucial to restarting peace talks.

Blair said he wanted to explore ways to break a deadlock between Palestinian President Mahmoud Abbas and a Hamas-led coalition over forming a unity government.

''It is important for us to say very clearly 'this is what we will do if you are prepared to accept that any negotiations on two states must be on the basis of mutual respect and mutual recognition','' Blair told a news conference.

''It's one of the things I want to do in the course of the visit ... to spell out exactly what we would do in those circumstances for the Palestinians, including and in respect of Hamas. Because I have never disputed Hamas's legitimacy or its mandate,'' he added.

Blair plans to visit the Middle East soon, anxious to make progress in the region before he steps down next year with his legacy overshadowed by the war in Iraq.

Talks between Abbas's Fatah movement and Hamas on forming a government collapsed last month over the Islamist Hamas's refusal to meet Western demands that it recognise Israel.

Abbas has told aides he is planning to call early elections, seeing little point in further talks on a government. He is expected to make a statement on Saturday.

Government sources say Blair wants to see if Abbas thinks he has any hope of negotiating a unity government. The Palestinian prime minister's statement could ask the public for new polls or a referendum on his political mandate -- possibly a way of pressuring Hamas back to the negotiating table, experts say.

The United States and European Union imposed crippling sanctions on the Palestinian Authority in March because of Hamas' refusal to recognise Israel, although the EU also set up a temporary mechanism bypassing the Hamas-led government to channel funds for Palestinians' basic needs.

Britain today announced a further .6 million (5 million) in aid for the Palestinians over the next four years.

Blair said it was imperative for there to be a government the West could deal with.

''If we could get such a government we could release funds to it, we could help with the desperate situation that the Palestinians are in and we could also then unlock the process of negotiation towards a lasting peace,'' he said.

Blair said he had been in constant dialogue with other countries in the region, part of his aim to get moderate Arab states to help solve the Arab-Israeli conflict that Blair sees as critical to halting bloodshed in Iraq.

''The stronger we have a coherent policy for the whole of the Middle East, the more likely it is that we can mobilise support for the proper government in Iraq,'' he added.

REUTERS PDM RN2122