Hamas signalled yesterday it still had problems accepting Western demands to recognise Israel and renounce violence, hours after international peace brokers agreed to temporarily send direct aid to the Palestinians.

Prime Minister Ismail Haniyeh said his Hamas officials would work with President Mahmoud Abbas?s Fatah to end fighting between the groups this week in which three gunmen have been killed. The clashes raised civil war fears among Palestinians.

The so-called Quartet of international mediators ? the United States, Russia, the European Union and the United Nations ? decided on Tuesday to send direct aid for a three-month trial period but the method of payment still had to be sorted out.

The United States, which has taken a tough stand against Hamas, bowed to pressure from the other Quartet members that an aid deal was needed to avoid the financial collapse of the Palestinian Authority and potentially more violence.

Hamas, a militant Islamist group sworn to Israel?s destruction, took control of the Palestinian Authority in March after defeating Abbas?s long-dominant Fatah movement in parliamentary elections.

This triggered a foreign aid freeze on the new Hamas-led government as major donor nations and Israel demanded the militant group renounce violence, recognise the Jewish state?s right to exist and embrace existing peace deals.

?The Quartet have conditions. They aim to push the Palestinian government to make concessions that harm (Palestinian) rights and red lines and give the (Israeli) occupation legitimacy,? Haniyeh told reporters in Gaza.

<B>Palestinian response</B>

Haniyeh did not elaborate but Palestinian Authority spokesman Ghazi Hamad said a statement would be issued yesterday in response to the Quartet?s decision. Hamas has largely abided by a ceasefire for more than a year but says talks with Israel would be a waste of time.

Israel has pledged to act unilaterally by removing isolated Jewish settlements in the occupied West Bank, bolstering major enclaves and setting the Jewish state?s borders by 2010 if peacemaking with the Palestinians remains frozen.

Israeli Prime Minister Ehud Olmert said in a speech he might wait up to six months to see if progress could be made before taking unilateral steps, which Palestinians have rejected as a move to deny them a viable state.

Justice Minister Haim Ramon told Army Radio yesterday that once Israel decided to go forward alone, ?final borders? could be set as soon as the end of 2008, much sooner than the 2010 target Olmert has set. The Quartet agreed to channel aid through what it termed an international mechanism amid warnings by Egypt, Jordan and Saudi Arabia of civil war if the Palestinian Authority was left to collapse because of lack of finance. Diplomats said one option to channel payments could be to use the World Bank or another financial institution.

The Palestinian Authority?s monthly budget is $180 million. The international community used to pay about two-thirds. Local, regional and international banks stopped dealing with the Palestinian Authority because they feared sanctions by the United States, which considers Hamas a terrorist organisation.

Senior Abbas aide Saeb Erekat told Reuters the Quartet?s plan did not go far enough. Abbas appealed in a letter to the Quartet for funds to pay salaries, overdue since March, to 165,000 workers employed by the Palestinian Authority, saying that besides an impending humanitarian crisis, non-payment would also affect security. Haniyeh said after meeting Fatah the two groups had agreed to work together to end the fighting in the Gaza Strip. The violence has been fuelled by a power struggle between Haniyeh and Abbas over control of Palestinian security forces.

In a second day of clashes on Tuesday, 12 people were wounded in gun battles between Hamas and Fatah members.

?I assure the Palestinian people that dialogue will be the only tool,? said Haniyeh. A joint statement said gunmen from both factions would not enjoy immunity if they were involved in any further clashes.