Palestinian Finance Minister Salam Fayyad plans to start paying partial salaries to government workers at the start of each month, a step union leaders said fell short of the unity government's promises.

Government employees' union chief Bassam Zakarneh Saturday threatened a new round of work stoppages, starting with a one-day "warning" strike on Wednesday, to demand full wages and back pay.

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Hamas Islamists formed a unity government last month with Palestinian Authority Chairman Mahmoud Abbas's secular Fatah faction in a bid to end internal fighting and ease a year-old economic embargo.

But tensions between Hamas and Fatah remain high, particularly in the Gaza Strip, and a Western ban on direct aid to the Palestinian Authority remains in place.

"We are going to perform half work if they are going to give us only part of our salaries," Zakarneh told Reuters. "If this government does not live up to its promises, we will consider entering an open-ended strike."

The union's stance underscored the difficulties Fayyad and the unity government face meeting the expectations of Palestinians who have not received their full wages since Hamas Islamists came to power in March 2006.

Fayyad is counting on receiving at least $55 million a month from Arab League members to cover about half of the Palestinian Authority's monthly payroll.

Fayyad's payments would be timed to coincide with "allowances" paid to workers through a European aid program known as the Temporary International Mechanism. The European payments are expected to total up to $34 million a month.

Together, Fayyad and the Europeans could cover up to 75 percent of the Palestinian Authority's $115 million monthly wage and pension bill, Western diplomats said.

The plan hinges in large part on the Bush administration giving a green light for Arab donors and banks to transfer funds to a Palestine Liberation Organisation (PLO) account under Fayyad's control.

A centerpiece of the year-old economic embargo of the Hamas-led government has been a ban on bank transfers. Fayyad hopes to sidestep these restrictions by using the PLO account.

U.S. officials said they were likely to approve Fayyad's request, but they denied that this constituted a change in U.S. policy.

Palestinian officials and Western diplomats said Fayyad plans to make the partial salary payments in the first week of each month, a small step toward normalcy for Palestinian workers. Previous payments through Abbas's office were not made on a regular basis.

Under Fayyad's plan, government workers would receive additional funds and back pay as more resources become available, Western diplomats said.

Despite appeals from Fayyad and Abbas, the European Union's aid commissioner said this week that EU aid will bypass the Hamas-led government until it recognises Israel, renounces violence and abides by interim peace deals as demanded by the Quartet of Middle East mediators
and Israel.