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The European Union lifted its boycott of the Palestinian Authority yesterday and is resuming relations and aid transfers. The EU also strongly condemned what it described as a "violent overthrow" in Gaza by the "Hamas militias."

"The European Union will renew is normal ties with the Palestinian Authority immediately and will develop ways to transfer urgent economic assistance," the EU said at a meeting of member-state foreign ministers in Luxembourg.

Foreign Minister Tzipi Livni, who addressed her counterparts, said "the Palestinian tax funds frozen in Israel will be released in the near future."

The European effort to restore ties with the PA will include direct assistance to the Palestinian government, a resumption of various programs to bolster the Palestinian police, and aid for establishing institutions of government and law. The observers mission at the Rafah crossing will continue to the extent possible.

The foreign ministers also called on Israel to release the Palestinian funds from customs and VAT duties that it has held since Hamas' election victory in January 2006. The subject was raised yesterday during talks between Livni and her counterparts from France, Germany and Luxembourg.

"It is a question of technicalities - about when and how - which will be discussed in the coming days with the Palestinians," Livni said, referring to Israel's plan to release the funds to the PA. "Israel does not intend to keep the funds for itself and will release it very soon."

Meanwhile, Prime Minister Ehud Olmert today will urge U.S. President George W. Bush to focus on isolating Hamas, according to officials accompanying Olmert on his trip to the United States.

"We want to make Hamas a pariah and prevent it joining the international game," a source in the prime minister's entourage said.

Bush and Olmert will discuss ways of boosting Palestinian Authority Chairman Mahmoud Abbas and the new Fatah government in the West Bank, while isolating Hamas in the Gaza Strip.

Israel is concerned that a strengthening of Hamas will lead to violence in the West Bank as well, so Israel will try to coordinate with Bush steps to prevent that.

The American administration has already taken steps to underscore its support for Abbas and the Fatah government in the West Bank, headed by Salam Fayad.

Bush spoke to Abbas by telephone, and Secretary of State Condoleezza Rice told the Palestinian leader that the U.S. was resuming security and humanitarian aid to the PA. She also spoke to Fayad about resuming the American aid.

Abbas told Bush it was important to resume peace talks, and that the current situation provided an opportunity to do so.

White House spokesman Tony Snow said afterward that Abbas was "a partner who is committed to peace ... and therefore we are committed to working with this new emergency government."

Olmert, who arrived in Washington yesterday, spoke to Jordan's King Abdallah on the phone about ways to boost Abbas. He told him Israel would do its part and transfer the Palestinian tax money.

Olmert met Rice and National Security Advisor Stephen Hadley before today's meeting with Bush.

Bush and Olmert will also discuss thwarting Iran's nuclear program. At the end of the year they are to review the approach to imposing sanctions on Iran and consider other measures.

Olmert will brief Bush on the messages he has conveyed to Syria and urge him to increase pressure to prevent arms smuggling from Syria to Hezbollah.

Bush is expected to announce that progress had been made in formulating an understanding memorandum ensuring continued and increasing U.S. military aid to Israel.

The Hamas takeover of Gaza has confused the U.S. administration. Washington had planned political initiatives to get Israeli-Palestinian relations back on track. Now it is unclear what Bush will do about the address he planned for next week, on the fifth anniversary of his "two state vision" speech.

Barak Ravid reported from Tel Aviv; Aluf Benn and Shmuel Rosner reported from Washington.