Israel will cut off ties with the Palestinian Authority, view it as a "hostile" entity and act to prevent Hamas from becoming an established government, Prime Minister-designate Ehud Olmert said yesterday.

Olmert also decided that Israel will refuse to hold official meetings with any public figures from abroad who meet with Hamas officials. This move is a renewal of the boycott Israel imposed on officials who met with the late Palestinian leader, Yasser Arafat.

Olmert said Israel viewed the Palestinians as "one authority, and not as having two heads," but would refrain from a "personal disqualification" of PA Chairman Mahmoud Abbas.

Olmert's statements came during a special session he convened in the wake of the swearing-in of the Hamas government, led by Palestinian Prime Minister Ismail Haniyeh. The decisions made at the meeting will soon be presented to the cabinet for approval.

In accordance with the policy set at the meeting, Israel will act to isolate the Hamas government, while taking care to prevent a humanitarian crisis in the territories. Israel does not want the PA to collapse completely, a security official said, adding that a collapse would make Israel's Civil Administration responsible for the territories.

In an effort to prevent a crisis, international aid would go to the Palestinian population without the intervention of the government services under Hamas' jurisdiction, perhaps by going through the authorities under Abbas' control, the official added. In addition, humanitarian aid would be able to pass through the checkpoints on the Gaza border, "subject to security considerations."

No security coordination

Officials at the meeting also decided to suspend security coordination with the Palestinians in the West Bank, and not only in the Gaza Strip. The last liaison office in Jericho will close today, and contact with Palestinian security forces will be maintained only to save lives - for instance, to extricate Israelis who have entered Palestinian areas or to prevent a terror attack. Security officials rejected a police request to maintain contact also in order to retrieve stolen vehicles.

Yesterday's decisions were based, in part, on an extensive report that was prepared by Yosef Mishlav, the coordinator of government activities in the territories, and describes all the channels of contact between Israel and the Palestinian Authority, along with the possible consequences of either maintaining contact or cutting ties.

Israel will allow limited Palestinian transit between the West Bank and Gaza, such as for family visits on Muslim and Christian holidays. Israel will also continue to allow visits to Palestinians held in Israeli jails. Abbas and his entourage will be able to travel between the West Bank and Gaza, but Palestinian security officials will no longer be allowed to do so.

Israel will continue to treat Palestinian patients at Israeli hospitals, but will coordinate their travel through Palestinian hospitals rather than through the Palestinian Authority. Similarly, Palestinian farmers and merchants will communicate directly with their clients and suppliers in Israel.

In light of reports of a looming humanitarian crisis in Gaza, Mishlav and his team have prepared an index to assess the situation that examines criteria such as the medicine and food inventory, the level of savings in the banks, the population's purchasing power and sanitation conditions. A four-level ranking system has been established to assess the situation, and a security official said that according to most parameters, the Gaza Strip falls between the two highest levels - "reasonable" and "good."

PA: Economic crisis worsening

Palestinian Finance Minister Omar Abdel Razik said yesterday that the Palestinian government will apparently not be able to pay the salaries of the 140,000 staff employed by the Palestinian Authority and its security services by April 15.

The workers have not received their paychecks this month, but Abdel Razik had said earlier that they would be paid by the 15th. He retracted the statement yesterday, saying the payments depended on financial aid due to arrive from several Arab states but that it was not certain that the money would arrive by mid-April.

Abdel Razik said money from the Palestinian investment fund, which includes PA assets valued at a total of about $1.6 million and is controlled by Abbas, should be used to pay the salaries. Most of the staff affected by the salary delay - 80 percent, by some estimates - are Fatah members. Hamas ministers are worried that continued non-payment of salaries could lead the Fatah members to riot and ultimately topple the Hamas government.

After holding a cabinet meeting yesterday, the Palestinian government called on the international community to reconsider its position on freezing financial aid to the PA. The government also called on the United States and Europe to condemn Israel for shelling Gaza, instead of punishing the Palestinians by halting aid. The plea came as Norway announced that it, too, would suspend its financial aid.