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Last Updated: Saturday, 23 December 2006, 03:14 GMT
Palestinian aid plan is extended
Palestinian boy painted with the words "I'm hungry" in a protest against the cutting of aid
The aid fund mechanism was due to expire at the end of the year
The United States says agreement has been reached on extending aid to the Palestinians while bypassing the Hamas-led government.

The state department said the US, UN, EU and Russia would continue the aid plan for another three months.

The mechanism, which had been due to expire at the end of the year, was created after an aid boycott was imposed on the Hamas-led government.

Funds will bypass the government unless it recognises Israel's right to exist.

Many Palestinians had suffered severe economic hardship following the aid freeze.

Humanitarian crisis

The "quartet" of Middle East peace brokers agreed to the extension during a conference call on Friday, state department spokesman Tom Casey told Reuters news agency.

$116m: PA's monthly wage bill
PA employs 165,000 people
25% of people in West Bank and Gaza depend on PA wages

A group statement said the Palestinian people were in need and encouraged donors to respond to aid requests from the UN and other international agencies.

The state department said further extensions would be considered after three months.

The quartet originally announced the aid fund plan in June, amid a mounting humanitarian crisis in the West Bank and Gaza.

They agreed to provide support for local health services, guarantee fuel supplies and provide for the basic needs of poor Palestinians.

Palestinian hospitals had been struggling to maintain services, and families had been selling off their valuables to buy food.

The Hamas-led Palestinian Authority (PA) has faced a financial crisis since Western donors cut off funding.

The Western aid boycott was imposed on the Hamas-led government unless it renounced violence, recognised Israel's right to exist and agreed to abide by past peace agreement.

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