Germany's foreign minister met with the Palestinian finance minister Saturday, the first talks in the region between a senior German official and a member of the new Palestinian unity government.

The visitor, Frank-Walter Steinmeier, met with the Finance Minister Salam Fayyad, an independent, at a hotel in the West Bank city of Bethlehem.

"I described to him the financial crisis we are facing," Fayyad said after the meeting. "I told him that there is no reason to continue the siege and the blockade."

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Palestinian officials had said they would urge Steinmeier to end international sanctions imposed on their government last year, when Hamas rose to power. "We will tell the German visitor we need to break the siege," said chief Palestine Liberation Organization negotiator Saeb Erekat.

After the meeting, Steinmeier's convoy briefly stopped on one of Bethlehem's main roads and the minister was given explanations about the Jewish neighborhood of Har Homa on a nearby hilltop.

Steinmeier then headed to Bethlehem's Church of the Nativity, one of Christianity's holy sites, built over the grotto where tradition says Jesus was born.

Steinmeier's visit hit a snag when the mayor of Bethlehem, Victor Batarseh, complained that he was not invited to the meeting in his town between Fayyad and Steinmeier.

"This is an insult to me as a person and to the municipality and to the
residents of Bethlehem," Batarseh said Saturday.

Officials with Steinmeier would not comment on why Batarseh was not invited but he is a member of the Popular Front for the Liberation of Palestine, which the European Union considers a terror group.

He was to visit a German-run school in Bethlehem, before driving to Ramallah for talks with Palestinian Authority Chairman Mahmoud Abbas, according to Information Minister Mustafa Barghouti and Foreign Minister Ziad Abu Amr.

During a visit to Israel and the PA last month, German Chancellor Angela Merkel had declined to meet with any members of the Palestinian government, a coalition of the Islamic militant Hamas and Abbas' Fatah party.

At the time, the perceived snub had upset the Palestinians, particularly since the European Union had decided just before the Merkel trip to approve meetings with non-Hamas members of the government, while continuing its boycott of Hamas.

Merkel currently serves as European Union president.

PA officials deny reports Abbas may resign over int'l sanctions
A senior official in Abbas' Fatah party said Friday afternoon that though Abbas is increasingly concerned about an ongoing international boycott of the Palestinian government, he has has not threatened to resign or call early elections over the impasse, despite earlier reports to the contrary.

Abbas met Wednesday and Thursday with leading Fatah members.

One of the Fatah officials, Nabil Shaath, denied reports that in these meetings, Abbas threatened to resign or call early elections if the sanctions aren't lifted soon.

"President Abbas didn't threaten, in the meetings of the Fatah Central Committee, to resign," Shaath said. "Neither were there any discussions about the possibility of dissolving the national unity government or going to early elections. The position was clear, that he supports the national unity government, but he stessed the urgent need for the international community to lift the embargo and resume its support of the Palestinian government."

Earlier, a senior official said that Abbas had told allies on Thursday he might resign in two months if Western sanctions on the Palestinian government are not lifted.

Abbas toured European and Arab capitals last month in a bid to ease an aid embargo and other economic sanctions imposed in response to Hamas's refusal to renounce violence or recognize Israel.

"In the next two months, if the siege is not lifted, then Abu Mazen may resign," the official, a leading figure in Abbas's secular Fatah faction, told Reuters.

Abbas's office had no immediate comment.

Abbas made the remark at a meeting of senior Fatah officials on Thursday. It is unclear whether resigning is a serious option under consideration by Abbas or merely a negotiating gambit.

Resignation could trigger an election which many fear could turn into a bloody showdown between Hamas and Fatah militants.

Abbas hoped to ease factional fighting and persuade Western nations and Israel to end sanctions that have crippled the Palestinian economy by forming a unity coalition government in March, including Fatah ministers under Palestinian Prime Minister Ismail Haniyeh of Hamas. The embargo, however, goes on.

"He is very frustrated at the continuation of the siege. He hoped by forming the unity government the sanctions would be eased. That is not happening. He is very frustrated."