Fatah flatly rejected a Hamas overture for dialogue yesterday, and Palestinian Authority Chairman Mahmoud Abbas banned all contacts with the Islamic group.

Mohammed Dahlan, Abbas's national security adviser and Hamas's arch-nemesis, branded the Islamists an "occupation force" in Gaza, the phrase commonly used to denounce Israel.

"It is surprising that while they [Fatah leaders] are for holding a dialogue with the Zionists, they reject dialogue with us," Hamas official Sami Abu Zuhri said yesterday.

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Hamas also rejected Abbas's decree outlawing the group's Executive Force and said the real Palestinian government was still headed by Prime Minister Ismail Haniyeh of Hamas. That force, along with Hamas' military wing, spearheaded the group's violent takeover of Gaza last week.

"Hamas rejects the decision by Abu Mazen [Abbas] to outlaw the Executive Force, because his decision contradicts the law," senior Hamas leader Khalil al-Haya said. "The current government of national unity is the legitimate caretaker government, and we do not recognize the emergency government."

Nevertheless, Haya told reporters in Gaza that the Islamist group was ready to hold talks with Abbas'sFatah faction to try to find common ground.

But the Fatah Central Committee said in a statement that it "decided today not to hold any dialogue, any contacts or any meetings with the Hamas movement." And a senior Wes tern diplomat said Abbas's office also made it clear that it does not want the international community to have "any contact or provide any legitimacy to Hamas in Gaza," except to facilitate the delivery of humanitarian assistance. While the flow of water and power will not be affected, he added, Gaza will face severe restrictions, including a freeze on exports, while Hamas is in power.

Abbas' aides said the emergency government believed it had a responsibility to pay any workers in Gaza, including members of the security services, who follow the new government's orders rather than those of the Hamas administration.

"But it's unclear how they would make that distinction," the diplomat said.

Abbas might use Arab funds, rather than tax money transferred by Israel, to pay the Gaza workers. A European Union aid program also plans to continue paying monthly "allowances" - approximately $360 each - directly to the PA's non-security work force, including those in Hamas-controlled Gaza, EU officials said.

But an Israeli official said Israel wants to scale back the European program to pay allowances only to workers in Gaza's health sector, to ensure hospitals keep functioning.
Israeli officials said that up to $400 million in Palestinian tax revenues will be transferred to Abbas's emergency government in stages. This is less than the $700 million sought by Abbas, but Israel says the rest of the money has been frozen by court order.

Majdi al-Khalidi, an adviser in Abbas's office, told Western diplomats that the emergency government put in place by the PA chairman could remain for a period of two months.