EU sees Palestinian 'opportunity'

The freeze has plunged Palestinians into economic and political crisis

The EU's Finnish presidency has called on member countries to welcome the creation of a new Palestinian national unity government.

Finnish Foreign Minister Erkki Tuomioja said the move could provide an opportunity to return to the Middle East peace process.

EU foreign ministers are meeting to discuss the aid embargo imposed after Hamas won parliamentary elections.

Washington has been insisting the aid freeze should remain in place.

Talks between political factions on the make up of a national unity government are continuing.

A Palestinian government of national unity... should lead to a re-examination of the policies of the international community toward the Palestinian government in terms of aid and contacts Philippe Douste-Blazy French foreign minister

Hamas and the Fatah faction led by Palestinian Authority President Mahmoud Abbas struck a deal on Monday on the programme of a national unity government.

The UN and aid agencies have warned that the aid embargo has left the Palestinian economy close to collapse, and in Gaza, contributed to a severe humanitarian crisis.

The embargo was imposed after the Islamist militant organisation Hamas, which refuses to recognise Israel and renounce violence, won January's elections.

Growing rift

Correspondents say these are signs of a growing rift between the US and the European Union over the issue.

A statement drafting by diplomats for the 25 European foreign ministers meeting in Brussels calls for the creation of the new government to be welcomed but stops short of committing the EU to ending the boycott.

"We have a new Palestinian government. We have a new situation, and we should use it to get back to the peace process," said Mr Tuomioja, whose country currently holds the rotating EU presidency.

Italian Foreign Minister Massimo D'Alema went further, saying his colleagues had already agreed to back the new government.

France's Douste-Blazy struck a different tone to the US

But in Washington, state department spokesman Sean McCormack insisted nothing had changed.

He said it was "not at all clear that the Palestinians have come to an agreement on a unity government" and said if they wanted the boycott to be lifted, they should "meet the conditions that are laid out for them".

Those conditions - set out by so-called Mid-East Quartet of the US, EU, UN and Russia - are recognition of Israel, renunciation of violence and recognition of previous peace accords with the Israelis.

'Tough decisions'

Mr McCormack said "the Palestinian people... need to understand why they are in the situation in which they find themselves now.

"They are in that situation because of the Hamas government, its failure to make the tough decisions to provide for the Palestinian people and to be able to govern effectively."

The BBC's Jonathan Beale at the state department says clear divisions are now emerging between the US and Europe on this issue.

He says the US shares Israeli objections to having Hamas represented at all in the Palestinian government.

Friday's meeting in Brussels will be followed next week by a meeting of members of the Quartet, where differences are likely to come to a head, our correspondent says.