Fatah agrees 'in principle' to join Palestinian coalition

The head of Fatah's bloc in parliament told reporters after talks with Hamas leaders that the faction had agreed in principle to join the cabinet, although the two sides still needed to reach an accord on a common programme.

"There is an agreement in principle and the intention is there (to participate in a coalition) but we must await the programme," Azzam al-Ahmed said.

"If we reach agreement, we will participate. If not, then we will be a constructive opposition."

Mahmud al-Zahar, who led the Hamas delegation at the talks in Gaza City, also said that "all the parties, including our brothers in Fatah, intend to participate in the government.

"We have agreed to continue our discussions," he added.

On Tuesday, Palestinian leader Mahmud Abbas, who is himself from Fatah, formally handed prospective Hamas prime minister Ismail Haniya a letter tasking him to form the next government.

Hamas won 74 of the 132 seats in the Palestinian parliament at a general election four weeks ago, thrashing Fatah, which won just 45.

However, despite Ahmed's comments, it is understood many Fatah members would rather sit back and watch Hamas grapple with a range of problems that include a growing financial crisis.

Both the United States and European Union have threatened to slash funding unless Hamas commits itself to non-violence, accepts past agreements and recognises Israel's right to exist.

Israel has refused point blank to deal with a Hamas-led government and has already imposed sanctions such as the withholding of customs duties worth around 50 million dollars a month.

The money is collected by the Jewish state on behalf of the Palestinians and accounts for around one third of the Palestinian Authority's budget.

The move has been criticised by the UN Middle East envoy and countries such as Egypt but the United States has backed Israel's "sovereign decision" to withhold the cash.

US President George W. Bush's Secretary of State Condoleezza Rice, who met Egyptian President Hosni Mubarak in Cairo Wednesday, is trying to persuade Arab countries not bail out Hamas on a brief tour of the Middle East.

Hamas official Mohammed Nazzal, who also held talks with officials in Cairo, said Washington's tough talk could only backfire.

"The more the United States pressures Hamas, the more the Palestinian people will support Hamas," he told AFP.

Arab League Secretary General Amr Mussa urged the European Union, the biggest donor to the Palestinians, to continue providing aid.

"The money given to government of Palestine does not go to ministers to enjoy their lives. It is for the Palestinians to eat, to send children to school," he said in Brussels.

Anticipating a freeze in funds, Hamas is looking to alternatives including its old allies in Tehran.

Iran's Supreme National Security Council chief Ali Larijani told Hamas's overall leader Khaled Meshaal that Tehran was ready to help out.

"We will definitely help this government financially in order to resist America's cruelty to this country," Larijani was quoted as saying.

And the Salafi Movement, a Kuwaiti Islamist group, called on the oil-rich emirate and other Arab and Muslim countries to boost financial aid to the Palestinians.

Although Hamas has held off attacks in the past year, Israel's political and defence establishment has vigorously argued that the movement remains bent on implementing its charter's call for the destruction of the Jewish state.

"They have every intention of throwing us into the sea, doing it step by step and getting others to do their dirty work for them," General Yair Naveh, who has responsibility for the West Bank as central region commander, told a gathering of diplomats and journalists in Jerusalem.

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