The United States has bowed to pressure from the European Union and agreed to find a "temporary international mechanism" to channel humanitarian aid to the Palestinian people.
The agreement was struck after a day of intense behind-closed-doors talks at the United Nations by representatives of the so-called Quartet, which has been struggling to find a middle course between isolating the new Hamas-led government while staving off a complete collapse of the already fragile Palestinian economy.
Earlier, the US Secretary of State, Condoleezza Rice, seemed to signal little leeway for compromise when she made a statement urging a continued hard line on Hamas, which has refused to heed demands from Washington and the EU that it recognise Israel and renounce terrorism.
But the Quartet, a group committed to brokering Middle East peace composed of the US, Russia, the EU and the UN, has been struggling to find a solution to the gathering economic crisis in the territories. Earlier this week, the World Bank warned of economic chaos if some way of supplying aid wasn't found.
Both the EU and the US cut off almost all aid to the Palestinians as a response to the election of the Hamas-led government in March. Washington in particular argued that isolating the new Palestinian leaders remained the only means to force them to change their positions.
At the last resort, some in the US argued, it would propel the Palestinians to new elections and possibly a new team of leaders. Attitudes in Washington were hardened after Hamas publicly sought to justify a suicide bombing in Tel Aviv on 17 April.
The impact of suspending aid has already been grave, however. The Palestinian Authority, which has depended almost totally on outside aid for years, has not been able to pay its workers for two months. The 165,000 government workers now without pay support about a third of all Palestinian families.
While the Quartet offered no concrete details of what kind of mechanism they envisaged, the task of setting it up was left to the EU. It seemed clear, however, that the World Bank will be asked to step forward to be the conduit for the funds. A first meeting of World Bank officials to discuss the next steps is expected in Brussels in the next few days.
"The Quartet expressed its willingness to endorse a temporary international mechanism that is limited in scope and duration, operates with full transparency and accountability," the group said in a statement. The task of managing the new mechanism will fall to the European Union.
Before making its decision, the group also heard stern warnings from foreign ministers also in New York yesterday of Egypt, Jordan and Lebanon, who made plain their view that unless the flow of money was somehow resumed a collapse of the Hamas-led government would only lead to civil war.
A similar warning was delivered by the President of the Palestinian Authority, Mahmoud Abbas.
The US, which had resisted earlier EU proposals for a special mechanism for funnelling aid, said after the meeting that any mechanism would have to be limited in scope to ensure none of the money ending up helping Hamas itself, still regarded by Washington and the EU as a terrorist group.
"The thrust of the statement is that the international community is still trying to respond to the needs of the Palestinian people," Ms Rice told a news conference at the United Nations with other Quartet members. "It is to provide assistance to the Palestinian people so they do not suffer deprivation."
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