KEY POINTS:
GAZA - Palestinian Prime Minister Ismail Haniyeh resigned today in a procedural move to pave the way for a unity government between his Hamas movement and the Fatah faction of President Mahmoud Abbas, an official said.
Under the terms of a Saudi-brokered deal, Haniyeh is expected to be
re-appointed Prime Minister to head the new unity government which aims to end Palestinian factional warfare and overcome a Western aid boycott of the Palestinian Authority.
A ban on direct Western financial assistance since Hamas came to power in March has pushed the Palestinian Authority to the brink of financial collapse.
But the prospects of ending the blockade were uncertain.
Diplomats and a Palestinian official said the United States was planning to boycott all Palestinian unity governent ministers because a unity deal reached in Saudi Arabia last week failed to meet demands for policy changes toward Israel.
Despite this problem and disagreements over several key cabinet posts, officials from Abbas' Fatah movement and Hamas agreed the two leaders would meet on Thursday evening in Gaza City, where Abbas arrived at around sundown.
During the talks, Haniyeh was expected to take the first step towards convening a unity government by tendering his resignation, after which Abbas would formally name Haniyeh to put together a new government, an official said.
A dispute over the composition of a unity cabinet disrupted talks on Wednesday, prompting Abbas to put off an address he had been due to give about the new government.
Ghazi Hamad, spokesman for the current Hamas-led government, said on Israeli Army Radio "there are a lot of problems". He cited the naming of an interior minister, a post that oversees security services, as one of them.
Another unresolved issue is the fate of Hamas' 5,600-member "executive" police force. Fatah is pushing for the force to be broken up but Hamas wants to keep it together.
Fighting between Hamas and Fatah killed more than 90 Palestinians between late December and early February. Both movements cited the violence as a key reason for pursuing a power-sharing pact.
A further complication arose when top Palestinian bank officials said they would not resume transfers to the government without assurances from the United States. Western diplomats said they doubted such assurances would be forthcoming.
A senior Palestinian official said: "The Americans have informed us that they will be boycotting the new government headed by Hamas. The Fatah and independent ministers will be treated the same way that Hamas ministers are treated."
Diplomats familiar with discussions on the issue confirmed Washington's intention to shun members of a unity government unless it satisfied international calls for Hamas to recognise Israel, renounce violence and accept interim peace accords.
In Washington, State Department spokesman Sean McCormack said it would be premature to say whether the US government will boycott all members of a unity government. A senior administration official said no decision had been taken yet.
Abbas will attend a summit in Jerusalem on Monday with US Secretary of State Condoleezza Rice and Israeli Prime Minister Ehud Olmert. Prospects for reviving peacemaking were likely to hinge on the outcome of Palestinian unity talks.
Envoys representing the Quartet of Middle East mediators -- the United States, Russia, European Union and United Nations -- were expected to meet in Jerusalem on Friday ahead of the summit. "I am opposed to cutting contact with Abbas," Olmert said during a visit to Turkey, where he was asked by reporters about future relations with the Palestinian leader.
- REUTERS