The European Union has formulated a plan to renew economic aid to the Palestinian Authority, if and when the new unity government agrees to meet international demands.

According to the program, the details of which were handed over to Israel, Europe is prepared to grant humanitarian and economic aid to the Palestinians. The program also includes "economic construction" to help bolster Palestinian governmental capabilities, as well as aid to build institutions for a new state, to create a legal system and support for a "blue" police force.

If the Palestinians agree to international demands, the current system of humanitarian aid - a program known as the Temporary International Mechanism (TIM), which bypasses contacts with Hamas - will be replaced with the International Mechanism, a program which will deal directly with the Palestinian government.

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The program was presented and well-recieved last week during a summit of the Quartet of Middle East peace negotiators.

European leaders have told PA Chairman Mahmoud Abbas that the new unity government must clearly meet international demands to recognize Israel, renounce violence and accept interim peace deals for sanctions to end, Abbas aides said on Sunday.

"We have asked the Europeans to help us lift the sanctions but their response was that the Palestinian government must be clear in its acceptance of the Quartet conditions," senior Abbas aide Saeb Erekat said after a European tour in which Abbas sought support for his power-sharing deal with Hamas Islamists.

Israel on Sunday welcomed the European Union's initial reaction to the Palestinian deal, saying European leaders remain committed to their demands of any Palestinian government.

Meanwhile, Egypt on Sunday rejected imposing any conditions on the new Palestinian unity government and said it was up to the Palestinians to convince key international mediators to end the U.S.-led financial sanctions.

Jordan's King Abdullah has said there was common Arab ground that the unity government must adhere to the demands of the Quartet. The king's remarks in an interview broadcast on Saturday cast doubts on the willingness of major Arab donors to sidestep a U.S.-led embargo of the Hamas-led government.

But Egyptian presidential spokesman Suuleiman Awad said: "There is always consultation between Egypt and Jordan but the Egyptian position is that ... we cannot set preconditions." He was speaking after talks in Cairo between Egyptian President Hosni Mubarak and King Abdullah.

"The policies that the new government will adopt is an internal Palestinian affair and Egypt has not and will not interfere to impose stances," he told a news conference.

Meanwhile, French President Jacques Chirac said Sunday that France would urge the next European Union summit to support the Palestinians' efforts toward a coalition government that would include the militant Hamas.

In telephone conversations Sunday with Egyptian President Hosni Mubarak and Saudi King Abdullah, Chirac said he would ask the EU to support the
power-sharing efforts at its next summit in March, Chirac's office said in a statement.

Chirac also said that the agreement to form an unity government was a first step towards meeting international demands for renouncing violence and recognizing Israel.

The deal two weeks ago is "a first step towards applying the conditions of the Quartet" of Middle East mediators, spokesman Jerome Bonnafont quoted Chirac as telling the two leaders.

EU official begins 4-day Mideast tour Monday
The European Union is sending a top official on a tour of the Middle East this week to try to maintain momentum in renewed efforts to forge peace between Israel and the Palestinians.

EU External Relations Commissioner Benita Ferrero-Waldner begins a four-day tour on Monday that will include stops in Egypt, Israel, the Palestinian Territories and Jordan.

Her trip comes after a diplomatic push by Abbas failed to persuade the European Union to lift a financial aid embargo that has crippled the Palestinian government since the radical Islamic Hamas won control of the Cabinet and legislature in elections a year ago.

Abbas had hoped that an agreement with Hamas to form a national unity government with his more moderate Fatah party would trigger world powers to unfreeze aid money.

But the deal, reached during talks in Saudi Arabia earlier this month, fell short of international demands that any Palestinian government recognize Israel, denounce violence and accept interim agreements with Israel.Hamas, which has in the past called for Israel's destruction, refuses to meet those conditions.

During Abbas' tour of Europe last week, European leaders said they would wait until a new Palestinian government was formed before deciding whether to resume direct aid.

On Saturday, French Foreign Minister Philippe Douste-Blazy, without mentioning foreign aid, pledged France's cooperation with the new government, the one bright spot on Abbas' four-day trip.

Ferrero-Waldner, one of the EU representatives present the at two recent meetings of the revived Quartet of Middle East mediators, said before leaving for the region that she would discuss "with all parties how we can each play our part in keeping the hope of progress toward peace in the Middle East alive."

On Monday, she is to meet in Cairo with Egyptian President Hosni Mubarak, Prime Minister Ahmed Nazif and Foreign Minister Aboul Gheit as well as with Amr Moussa, the head of the Arab League

In Jerusalem on Tuesday, she will meet Prime Minister Ehud Olmert and with Foreign Minister Tzipi Livni.

On Wednesday, Ferrero-Waldner plans to meet with Abbas and other Palestinian leaders. On Thursday, she travels to Amman, Jordan.

A Quartet meeting last Wednesday in Berlin underscored the group's demands for a Palestinian government that includes Hamas to recognize Israel, foreswear violence and adhere to earlier Palestinian-Israeli agreements.

The four powers - which in addition to the EU include the United States, the United Nations and Russia - held two gatherings this month after a period of dormancy. The group plans to meet regularly and said in Berlin that it will hold a future meeting in an Arab country, an apparent effort to involve moderate Arab governments in the Quartet's efforts.

The prospect that a new unity government will trigger a renewal of direct foreign aid to the Palestinian government is slim. The Hamas-Fatah deal, the primary aim of which was to end a period of violent factional conflict that killed more than 130 people, skirted the issue of recognizing Israel.

Under the February 9 accord, Hamas agreed only to respect previous Israel-Palestinian agreements.

The aid cutoff has affected some $1 billion in direct annual foreign aid and about 400 million euros in tax revenues Israel collects on imports heading for the Palestinians.

Israel has said it would not negotiate a long-term peace deal with Abbas if he goes ahead with a coalition with Hamas, limiting immediate prospects for progress toward a solution.

Meanwhile, as a quick-fix solution, the EU has been transferring hundreds of millions of euros through a temporary World Bank-monitored program that pays allowances to Palestinian civil servants who have gone unpaid and funds health and social projects.

EU officials said Ferrero-Waldner's discussions will explore ways to improve the disbursement of aid through the alternative aid channel.

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