A panel appointed by the Palestine Liberation Organization has recommended that moderate Palestinian Authority Chairman Mahmoud Abbas, dissolve the militant Hamas-led government and call new elections as early as March, an official close to the president said.

Abbas sought the committee's recommendations after declaring last week that his efforts to form a more moderate coalition government with Hamas had reached a dead end.

Hamas' refusal to recognize Israel has provoked harsh international economic sanctions, and Abbas hoped a new government would persuade the West and Israel to get desperately needed funding flowing again.

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Hamas defeated Abbas' Fatah party in parliamentary elections early this year. Abbas, a moderate who favors peace talks with Israel, was elected separately last year.

On Wednesday night, Abbas met with the committee for five hours to discuss the options available to him, the official said, speaking on condition of anonymity because he was not authorized to discuss private talks with the media.

Saeb Erekat, an Abbas confidant, said it was "premature to jump to any conclusions about the options," but said Abbas would deliver a speech next week outlining his course of action.

Abbas will meet on Saturday with the PLO's main decision-making body to discuss strategy, Erekat said.

Hamas denounced the notion of early elections.

"Any step like that would be a circumvention of the decision of the Palestinian people on Jan. 25, when they elected Hamas to be their representative," said Fawzi Barhoum, a Hamas spokesman in Gaza.

"Our position remains unchanged: We are opening the door to talks to achieve an agreement on a unity government," Barhoum said. "It is Fatah that is stopping these talks."

Abbas has two options if he concludes the current government cannot go on, and a coalition government won't be formed. Early elections were one alternative, another being to dissolve the government and try to form another Cabinet without another round of balloting.

Both are problematic as far as Abbas is concerned, but the panel apparently thinks early elections would be preferable.

Polls have signaled that Fatah, which is dogged by corruption and patronage, would again lose to Hamas in new elections. But to avoid new balloting, Abbas would have to win parliamentary approval for a new Cabinet - and that would be unlikely because Hamas dominates the legislature.

Abbas is to meet with the PLO's main decision-making body, the executive committee, to discuss whether to adopt the panel's recommendation, the official said.

Abbas plans to present his decision in a speech next week to the Palestinian people, the official said.