The Israeli government crisis should not be allowed to undermine efforts to revive the Middle East peace process, European Union president Germany said on Thursday.

Prime Minister Ehud Olmert is trying to fend off public and political pressure to resign in the wake of the Winograd Committee's scathing report on the government's handling of the Second Lebanon War.

"A situation like this, in which the Israeli government ... is under pressure, should not be allowed to lead to the abandoning of our joint efforts to strengthen the peace process," German Foreign Minister Frank-Walter Steinmeier told reporters after meeting his counterpart from New Zealand.

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Steinmeier said the efforts of the Middle East Quartet of peace negotiators needed to be complemented by efforts in the region, above all by closer contact between Israel and the Palestinian Authority.

"I hope that despite the present difficulties in Israel after the submission of the report, the efforts will continue," he said.

"I especially hope the bilateral talks between Prime Minister [Ehud] Olmert and Palestinian President [Mahmoud] Abbas will continue ... and that the timetable is adhered to."

Officials from the Quartet and four Arab nations will meet in Egypt on Friday in the Red Sea resort of Sharm el-Sheikh after a meeting of Iraq's neighbors, ministers from the Group of Eight nations and the EU to discuss how to stabilize Iraq.

Steinmeier will attend the Iraq conference before embarking on a tour of the Middle East.

Group of EU parliamentarians calls for end to aid embargo on PA gov't
A group of European Union parliamentarians on Thursday urged the EU to end the aid embargo on the Palestinian government and resume direct payments that were suspended after Hamas won elections last year.

Members of the European Parliament's delegation for relations with the Palestinian legislature met Palestinian Prime Minister Ismail Haniyeh in Gaza City on Tuesday - the first meeting between a European delegation and the Hamas since the radical Islamic group came to power last year.

The EU considers Hamas a terrorist organization because it has killed hundreds of Israelis in suicide bombing attacks. Also, the EU does not recognize a new Palestinian coalition government, because it has not accepted international demands to renounce violence, accept past peace agreements and recognize Israel.

The EU boycott includes a ban on meeting Hamas officials. But the European Parliament delegation said it believes the program of the new Palestinian government - which includes more moderate members of the Fatah party alongside Hamas - does reflect international demands.

It urged the EU to fully engage with the new Palestinian government and resume aid as a matter of urgency to prevent a further deterioration of the situation in the West Bank and Gaza.

Donors still provide aid, but it bypasses the government, and experts say that makes it less effective.

Christina Gallach, spokeswoman for EU foreign policy chief Javier Solana, said the visit Tuesday was an individual initiative by the EU legislators and does not mean EU policy toward the Palestinian government has changed.