Palestinian Finance Minister Salam Fayad told the European Union on Wednesday a new national unity government needed more than $1.3 billion in international aid this year to avert a "devastating" humanitarian crisis.

He won a cautious endorsement from EU External Relations Commissioner Benita Ferrero-Waldner, who promised technical assistance to enable his ministry to receive aid once the Palestinian Authority met crucial political conditions.

"We are looking for external support to bridge a gap of nearly 1 billion euros [$1.34 billion] for 2007," Fayad told a joint news conference, stressing his government's commitment to respect all peace accords with Israel.

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Asked what would happen if aid was not forthcoming, he said: "The consequences are far too grave, quite frankly."

Fayad, a respected independent technocrat, was on the first visit to Brussels by a member of the new government after the EU boycotted the former Hamas-led administration due to the Islamic movement's refusal to recognise Israel or renounce violence.

Ferrero-Waldner praised his personal commitment to peace but made clear the EU's engagement would be selective, gradual and dependent on the government's words and actions.

"I've made very clear that possible financial engagement would not mean resuming direct financial assistance overnight," she said, pledging that a temporary aid system created to bypass the Hamas-led government would remain for as long as necessary.

The Finance Ministry would take months to meet international standards for absorbing aid, and "the EU will also need time to come to a decision then on this political issue", she said.

The EU, the Palestinians' biggest donor, increased aid from 500 million to 700 million euros last year, paying subsistence allowances to 150,000 families and keeping essential services going through the Temporary International Mechanism.

The Quartet of Middle East peace brokers - the United States, Russia, the United Nations and the European Union - suspended direct aid to the PA after the Hamas formed a government last year.

While Fayad presented the PA as a single team committed to the same platform, the Commissioner made clear the EU would work with non-Hamas members such as PA Foreign Minister Ziad Abu Amr and Information Minister Mustafa Barghouti.

"The Commission is standing by its commitments to support the national unity government depending on how it supports the Quartet principles," she said.

Fayad said the PA was operating on a quarter of the funds it needs to provide essential services to the population.

Even once a properly functioning finance ministry was restored, economic recovery would require the lifting of Israeli restrictions on trade, movement and access tightened as part of a security crackdown against the Hamas government, he said.

He was to meet the EU's Middle East peace envoy, Marc Otte, and European Parliament leaders before travelling to Norway.

Hamas: U.S. security aid to Abbas "dirty money"
Hamas has criticized as "dirty" money a $59 million U.S. program to bolster Palestinian Authority Chairman Mahmoud Abbas's presidential guard.

"(The money) does not contribute to the interests of the Palestinian people and aims only to harm national unity," senior Hamas lawmaker Yehya Moussa said on Wednesday.

Abbas's Fatah faction formed a unity government with Hamas last month but tensions between the groups remain high.

Moussa said the money was "dirty" because it will bypass the Hamas-led government and go directly to support Abbas's presidential guard.

Moussa said the United States has "malicious intentions" to fuel fighting between Hamas and the once-dominant Fatah.

The Bush administration said this week it had received a green light from Congress to start the $59.4 million security program.

The bulk of the package -- $43.4 million -- will be used to "transform and strengthen the Palestinian Authority presidential guard", according to U.S. government documents.

This sum includes $14.5 million for "basic and advanced training", $23 million for non-lethal equipment, $2.9 million to upgrade the guard's facilities and $3 million to provide "capacity building and technical assistance" to the office of Abbas's national security adviser.

The package also includes $16 million to bolster security at the Karni commercial crossing between Gaza and Israel.