U.S. Consul-General Jacob Walles met Palestinian Finance Minister Salam Fayyad on Tuesday, in the first American talks with a member of the new Palestinian unity government.

The United States had said it might hold unofficial contacts with non-Hamas members of the Hamas-Fatah government, which was sworn in Saturday.

Fayyad, an independent, confirmed the meeting in an interview broadcast on Al Jazeera television.

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The Foreign Ministry in Jerusalem on Tuesday cancelled a meeting with a high-ranking Norwegian official, Norway and Israel said, a day after he met with Palestinian Prime Minister Ismail Haniyeh of Hamas.

Norway's Deputy Foreign Minister Raymond Johansen met with Haniyeh in Gaza on Monday morning, marking the country's restoration of political and economic ties with the new Palestinian government. Johansen was the first senior European official to meet the new government.

Norway is not a member of the EU, but is a key player in Middle East peacemaking and a major aid donor to the Palestinian Authority.

Johansen's spokeswoman, Gry Larsen, said a meeting scheduled at the Foreign Ministry in Jerusalem for Tuesday had been called off, but she did not give further details.

Foreign Ministry spokesman Mark Regev could not confirm that a meeting with Johansen had originally been arranged. He said, however, that no such encounter would take place, citing a cabinet decision made after Hamas took control of the Palestinian government in the wake of its January 2006 election victory.

"There was a Cabinet ruling last year... International dignitaries who meet with Hamas officials will not receive meetings with Israeli officials," Regev said.

German Chancellor Angela Merkel on Tuesday urged Abbas to ensure that the new Fatah-Hamas coalition government adopts the demands of the Quartet of Mideast peacemakers, her spokesman said.

In a telephone conversation with Abbas, Merkel told the Palestinian leader that she was glad that the new government had helped lead to internal stability, spokesman Ulrich Wilhelm said in a statement.

At the same time, she urged again that the new government fulfill the criteria of the Quartet, in particular the renunciation of violence and the recognition of Israel, Wilhelm said.

She also urged Abbas to do everything possible to secure the release of Gilad Shalit.

PMO: New government 'steeped in terror'
Israeli officials Tuesday repeated their call for the international community to ostracize the new Hamas-Fatah Palestinian government branding it "a government steeped in terror."

"Following Hamas' first terror attack since joining the Palestinian government over the weekend, it is evident that this is a government steeped in terror which the international community should avoid," David Baker, an official in the Prime Minister's Office, told Haaretz on Tuesday.

Senior Foreign Ministry officials have welcomed the decision of the Quartet of Middle East mediators to maintain their aid embargo on the Palestinian government, Israel Radio reported Tuesday.

"Israel has not detected a collapse in the international position against Hamas," the radio quoted an unnamed senior official as saying.

European officials said Monday they were optimistic the new authority would ultimately meet conditions needed for it to be scrapped, but after Quartet ministers spoke by telephone, State Department spokesman Sean McCormack said there was no change in the aid embargo unless the new government met the demands placed on it. A Quartet statement will likely be released on Tuesday.

The European Union External Relations Commissioner, Benita Ferrero-Waldner, said the mechanism used by the Quartet to get money to the Palestinians while bypassing the government would be extended for three months while it made a judgment on the new government.

The United Nations, EU, Russia and the United States, the members of the Quartet, have demanded the Hamas-led government recognize Israel, renounce violence and agree to Israeli-Palestinian accords before the embargo is lifted.

Speaking Monday, U.S. Secretary of State Condoleezza Rice voiced veiled criticism of Hamas and initial policy statements of the new Palestinian government.

Rice, who will visit the Palestinian territories and Israel in the coming days, said she wanted Palestinian Prime Minister Ismail Haniyeh to clarify what he meant when he said the Palestinian people had a "right to resistance," a phrase in the new government's platform that has rankled Israel and others.

"I am not going to try to interpret what the right of resistance means, but I'll tell you it doesn't sound very good to me when one talks about all forms of resistance," Rice said.

"So I would put the question to the Palestinian government and to its prime minister - do you mean the right of resistance by violence? And let's get an answer."

The armed wing of Hamas on Monday claimed responsibility for a shooting attack in which an Israeli civilian was wounded near the Gaza Strip. Israel warned of harsh response to further terror attacks.

State Department spokesman Sean McCormack said Rice was "pointing out that it is incumbent on the Palestinians to further define exactly what they mean, rather than just use some sort of catch phrase that's rather antiseptic."

Javier Solana, the EU's foreign policy chief, said Monday that the new Palestinian government has not yet met the Quartet's conditions for lifting the aid embargo.

"We expect very much that this government... will be taking the positions of the Quartet as much as possible and in the end completely," he told a news conference with Rice and other European ministers.

Ferrero-Waldner said some members of the new Palestinian government had already indicated they would support Quartet principles and she hoped they would have some influence.

"This presents an opportunity and we have to think carefully how to respond to it," she said.

"We will have to judge the new government by its actions and its words and I do hope that the momentum towards fulfillment of the three Quartet principles will indeed be maintained," she said.

"It is very important that, in this delicate moment, we at least can go on with our temporary international mechanism," she said.

She said other Quartet members were also interested in her idea of finding a more permanent mechanism to help build institutions in the Palestinian territories.

"We are looking at what could be done as if a Palestinian state comes about we have to have institutions that function according to good governance," said Ferrero-Waldner.

The United States, while pushing for the embargo to stay in place, has softened its stand on having contacts with the new Palestinian government and McCormack said Washington could deal with some non-Hamas members in the government on a case-by-case basis.

The European Union presidency, currently held by Germany, said Saturday that it is willing to work with the new coalition government and resume aid, but only if Hamas first meets those three demands.

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