Hamas does not object to funnelling aid via Abbas

The government, cut off financially and diplomatically by the United States and European Union for refusing to renounce violence and recognise Israel, is struggling to secure funds to pay overdue salaries and keep ministries running.

The United States has not blocked funds from flowing to Abbas's office, his security forces and other institutions under his direct control. Abbas supports peace talks with Israel.

But employees of institutions linked to the president's office still receive their salaries through the Finance Ministry, just like the rest of the government.

In a bid to ease the crisis European diplomats say they may send funds to pay some Palestinian government salaries through Abbas's office or through an outside trust fund.

"The proposed scenario through the media is to transfer money through the presidency. We as a government, and the presidency, have no problem whatsoever to transfer all the money through the presidency," Abdel-Razek told a news conference.

Hamas, an Islamic militant group sworn to destroy Israel, says the Arab League has set up bank accounts in Egypt that now hold up to $90 million (50.3 million pounds) to help fund the Palestinian Authority.

The Authority needs nearly $120 million to pay March salaries and a similar amount for April comes due next week.

The Arab League puts the total in the banks at $70 million and says it plans to transfer $50 million on Wednesday to the Authority.

"We are now discussing the mechanisms for bringing in these funds," said Hamas member Abdel-Razek.

SOLUTION SOON?

But regional banks, fearing U.S. sanctions, have so far refused to handle Hamas government funds, and it is unclear if the promised aid will make it to the Authority.

"We have not failed," Abdel-Razek said. "This is not a crisis for the government, this is a crisis for the entire Palestinian people and should be dealt with as such."

"The Arabs and Muslims must bear their responsibilities and pay their commitments."

Abdel-Razek said Arab banks have not been ordered by the Egyptian and Jordanian central banks to block the new government's funds, but were acting on their own out of "precautionary fear" of U.S. retaliation.

He added: "We hope to reach a solution very soon."

Hamas ministers privately say they are in a dilemma and have no plans in place to overcome the financial crisis.

A Western diplomat monitoring Hamas's finances said he doubted a solution would be found quickly.

"All this money from Qatar and Saudi Arabia is stuck in Cairo. There are no banks willing to take it to the PA," the diplomat said.

Sporadic protests have broken out over unpaid March salaries, but some officials said the situation could deteriorate further if the funding blockade continues. It has gone on for nearly a month, affecting 165,000 workers.

On top of the $50 million donated by Qatar, Saudi Arabia has sent $20 million, the Arab League said. It was not immediately clear what Hamas's $90 million figure included.

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