The European Union is ready to continue aid to the Palestinians but wants to see a Hamas-led government commit itself to seeking peace with Israel, according to a draft text.
The 25-nation EU is the biggest donor to the Palestinians, giving €500 million last year, but that policy was thrown into question by the election triumph last week of Islamic militant group Hamas, which is on an EU list of banned terrorist organisations.
"The EU stands ready to continue to support Palestinian economic development and democratic state-building," one EU diplomat quoted the draft as saying.
He said the text also stated the EU would expect the new Palestinian Legislative Council to back the creation of a government "committed to a peaceful and negotiated solution of the conflict with Israel".
Hamas is committed to Israel's destruction and has carried out nearly 60 suicide bombings since a Palestinian uprising began in 2000.
A senior Hamas official earlier brushed aside warnings that Western aid to the Palestinians could dry up because of the militants' hardline stand on Israel, saying the Islamic group would not bow to international pressure.
"Cutting off funds now will be a punishment of the Palestinian people, not of Hamas," said Mohammed Nazzal, member of Hamas' decision-making political bureau, which is based in Damascus, Syria.
But another Hamas leader in the Palestinian territories asked the international community not to cut aid to the Palestinian Authority. Ismail Hanniyeh promised in Gaza that the money would only go towards helping the Palestinians and said a Hamas government is ready to have its spending monitored.
Earlier, EU External Relations Commissioner Benita Ferrero-Waldner said the bloc wanted to avoid the financial collapse of the cash-strapped Palestinian Authority.
The United States, which has given more than $1.5 billion in aid to the Palestinians since 1993 and had budgeted $234 million for 2006, has begun a review of such assistance programmes since Hamas's election win.