European Union aid will bypass the Palestinian unity government until it recognizes Israel, renounces violence and abides by interim peace deals, the EU's aid commissioner said on Thursday.

After meeting Foreign Minister Tzipi Livni, Michel said the humanitarian situation in the Gaza Strip and the occupied West Bank had deteriorated "a lot" since the sanctions were put in place.

"As long as these criteria are not fulfilled, there will not be a change in the system, the manner, the process of aid support from the European Union," commissioner Louis Michel told reporters in Tel Aviv.

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Palestinians hoped the formation of a unity government between Hamas and Palestinian Authority Chairman Mahmoud Abbas's secular Fatah faction would prompt the EU and other major donors to lift a year-old economic embargo of the PA.

Both Abbas and Palestinian Finance Minister Salam Fayyad have paid multiple visits to European countries in the past few weeks in an attempt to convince them to lift the economic boycott.

A senior European official, speaking on condition of anonymity, said the aid restrictions reflected concerns that Hamas would exert control over government funds despite the appointment of Salam Fayyad as finance minister. Fayyad has good relations with Western powers and is not a member of Hamas.

"It's a question of chain of command," the official said

Israel has been pressing the EU to keep the sanctions in place to keep pressure on Hamas to meet the three conditions set by the Quartet of Middle East mediators, the EU, the United States, Russia and the United Nations.

The Palestinian unity government's program contains a promise to "respect" previous Israeli-Palestinian pacts but does not call for recognizing Israel and says resistance in "all its forms" is a legitimate right.

Prime Minister Ismail Haniyeh of Hamas warned this week that the group would reassess its strategy in one to two months if Western sanctions were not lifted on the government.

Hamas took control of the government in March 2006 after beating Fatah in parliamentary elections.

To help cushion the economic shock, the EU has been funneling aid through its so-called Temporary International Mechanism, which bypasses the Palestinian government.

EU officials said they expected the mechanism to provide up to 34 million euro a month in "allowances" directly to Palestinian government workers, retirees and other poor people in the West Bank and Gaza.

The EU funds would supplement partial salary payments that Fayyad hopes to start making through a Palestine Liberation Organization account.

The Bush administration is expected to make it easier for money to flow to the PLO account, part of a shifting U.S. strategy aimed at elevating non-Hamas ministers like Fayyad within the unity government.