DUBAI - Palestinian Prime Minister Ismail Haniyeh said Iran had pledged about $250 million in financial aid to Palestinians for 2007 to help ease the economic crisis caused by a Western aid boycott.

"My visit to Tehran has achieved direct financial support with a sum of about a quarter billion dollars," he said after a visit to Iran in a tour of Islamic nations.

"They offered a number of projects that represent direct financial support to the Palestinian government and people," he told Al Arabiya television in remarks aired on Monday.

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The overall sum includes $120 million in direct funds to the Palestinian government.

He said the Iranian government also pledged to pay the salaries of 100,000 state employees for six months at the rate of $100 a month and to pay a similar amount to 3,000 fishermen over the same period.

Last month a Palestinian minister said Iran had donated $120 million to the Palestinian Hamas-led government and said it was ready to give more.

The Hamas-led government has been brought to the brink of financial collapse due to a Western aid boycott over its refusal to recognise Israel, renounce violence and embrace interim Israeli-Palestinian peace deals.

In Jerusalem, Foreign Ministry spokesman Mark Regev criticised Haniyeh's visit to Iran. "Palestinian leaders who have chosen to align themselves with the extremists in Tehran are unfortunately doing their own people a disservice by acting to exclude the possibility of political progress," he said.

Iran's Islamic government has never recognized Israel and last year Iranian President Mahmoud Ahmadinejad called for Israel to be "wiped off the map".

Earlier this month, Haniyeh said Qatar, a U.S. ally, pledged to pay the salaries of 40,000 Palestinian education workers for several months.

EU seeks 3-month extension for Palestinian aid that bypasses Hamas
The European Commission on Monday proposed a three-month extension of a special aid deal for the Palestinians that bypasses the Hamas-led government.

The refusal of the Islamic militant group to recognize Israel has caused
international aid to the Palestinian Authority to dry up, creating an acute financial crisis.

A temporary World Bank-supervised alternative that bypasses the Hamas
government expires at year's end and "it is highly important" it is extended by another three months, said EU External Relations Commissioner Benita Ferrero-Waldner.

"We see that the situation in the Palestinian territories deteriorates," she told reporters.

Her request to extend the special aid scheme for another three months was
expected to be endorsed by the 25 EU leaders at a two-day summit opening
Thursday, diplomats said. It took effect in July and has already been extended once.

Since the start of the year, the European Union has provided some
$863 million in aid for Palestinians. Of this, $266 million has gone through the emergency aid program guaranteeing 1.3 million Palestinians access to water, sanitation and health care and providing income support payments to about 1 million Palestinians left destitute by their government's financial crisis, including many public service employees who have gone unpaid.

Restoring direct EU aid to the Palestinian government hinges on the ability of rival Palestinian factions to form a government of national unity - an issue that has been under debate for weeks. Palestinian President Mahmoud Abbas has been at pains to form a broader-based government that would to bring in his more moderate Fatah party to govern
alongside Hamas, which has refused international calls to renounce violence, recognize Israel and honor existing Israeli-Palestinian agreements.

By forming a unity government, Abbas hopes to end the crippling aid cutoff. However, with negotiations deadlocked, Abbas could decide to call new elections instead.

The EU is the Palestinians' largest donor. Israel fears Europeans will go soft on sanctions in view of the hardship faced by many Palestinians. The EU has called on Israel to restore to the Palestinian government payments of import duties on goods that are headed for the West Bank and Gaza.

Also Monday, Amnesty International urged the EU to make human rights the
"anchor of the Middle East peace process." The EU "should not hesitate to use all its weight to ensure that basic rights are safeguarded," Dick Oosting, head of Amnesty's EU office, wrote in a letter to the EU foreign ministers. "A cease-fire alone, without respect for human rights, will not bring lasting peace."