Norway says pushing forward with Palestinian aid

OSLO, May 21 (Reuters) Norway said today it would soon go ahead with a plan to restore direct aid to the Palestinian unity government despite escalating violence, and would send funds to a PLO account to circumvent banking restrictions. In March, Norway became the first Western nation to recognise the government and last month pledged to resume direct support to the Palestinian Authority as soon as the channels to provide such funds were open.

Norwegian Foreign Minister Jonas Gahr Stoere said a Palestinian Liberation Organisation account controlled by Palestinian Finance Minister Salam Fayyad could enable Norway to provide aid.

''Norway is preparing to do so very soon by a transfer of 10 million dollar,'' Stoere told a conference on European affairs in Oslo. ''I urge others to follow.'' The Nordic country has said it expects to provide some 100 million dollar of direct budget support and other aid to the Palestinian territories this year.

Norway -- along with Middle East peace brokers the European Union, the United Nations, the United States and Russia -- suspended direct aid in 2006 after Hamas formed a government.

The embargo, part of an effort to force the Palestinian Authority to recognise Israel, renounce violence and honour Israeli-Palestinian peace deals, blocked funds other than humanitarian aid to the territories.

EU outsider Norway's decision to recognise the new unity government, formed in March with Fatah, and resume aid has been criticised by Jerusalem and Washington and has put it out of step with European allies, although the EU is also grappling with the possibility of restoring aid.

''We cannot on the one hand say we expect the government to deal with the problem and say that we do not want to deal with the government,'' Stoere told a news conference.

The latest round of street fighting in Gaza between the Hamas and Fatah factions has killed about 50 people. Israel air strikes, to prevent militants firing rockets into southern Israel, have killed at least 34 Palestinians.

Stoere said the forces of moderation needed to be supported or the alternative would be more violence.

European Commissioner for External Relations and European Neighbourhood Policy Benita Ferrero-Waldner said this was a major reason why the EU was considering supporting the unity government as well.

''We are gradually engaging, and I think the objective is indeed the same (as Norway's), to give some strength and possibility of surviving to the national unity government,'' she told a news conference, also in Oslo.

Ferrero-Waldner said she hoped an EU ministerial meeting in June could reach a political understanding on the issue, but she said the current upswing in violence could jeopardise that goal.

''I am very concerned about the violence that is there on the ground, which of course does not help this goal,'' she said.

Reuters AM GC2256