Prime Minister Ehud Olmert called Palestinian Prime Minister Ismail Haniyeh of Hamas a "terrorist" and accused him of transferring more than $1 million to militants to carry out attacks against Israel, in an interview with Time magazine released Friday.

Haniyeh aide Ghazi Hamad said Olmert's statements were "confused and irresponsible".

Israel has been urging other countries to shun Haniyeh and the government, citing Hamas's refusal to recognize Israel or renounce violence.

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"Just lately Haniyeh transferred over a million dollars for a group of terrorists to carry out terrorist actions against Israeli citizens," Olmert said.

"He's a terrorist," added Olmert. "You have a terrorist who is prime minister of the Palestinian Authority now."

Olmert told Time the funds came from outside the Palestinian territories and were transferred to one of Hamas's armed wings for the "explicit purpose of carrying out terrorist actions."

He offered no other details about the transfer.

An Israeli security source said Israel believes that Haniyeh was directly involved in the decision to make the transfer, which took place in recent weeks. The money was not taken from the Palestinian government, the source said.

According to Olmert, Abbas said "time and again that 'I will not agree to have a government with Haniyeh as prime minister.'"

Olmert has vowed to shun the Palestinian unity government and has urged other countries to follow suit. He has agreed to meet Abbas every two weeks.

Hamad brushed aside Olmert's comments in Time. "It seems that the Arab and international support for the unity government has provoked and angered Olmert, and has pushed him to take a confused and irresponsible position," he said.

"The terrorist is the one who kills children, raids villages and [refugee] camps, builds settlements and confiscates the land. It is not Ismail Haniyeh."