Israel?s cabinet yesterday approved voting in Arab East Jerusalem in a January 25 Palestinian parliamentary election but said it would ban the militant Hamas group from listing its candidates on ballots there.

The government approved the decision unanimously, an official said, after US pressure to lift, in the interests of Palestinian democracy, opposition to voting in East Jerusalem, whose status is at the center of the Middle East dispute.

Palestinians had warned Israel against measures that would disrupt or postpone the parliamentary poll, in which Hamas is participating for the first time. Mushir al-Masri, a Hamas spokesman, said Israel?s restrictions diminished Palestinian sovereignty over the election.

Israel captured East Jerusalem in the 1967 Middle East war and annexed it in a move not recognized internationally. Palestinians want East Jerusalem as capital of a future state they hope to establish in the West Bank and Gaza. Hamas, popular among many Palestinians for its social welfare network and anti-corruption policies, is expected to make a strong showing against the mainstream Fatah faction.

In further consolidation of his potential power, interim Prime Minister Ehud Olmert this week was expected to be named chairman of the centrist Kadima Party, which Sharon formed after quitting the rightist Likud last year to push for peace with the Palestinians. The resignations of three cabinet members from the Likud who quit last week under orders from party leader Benjamin Netanyahu come into effect on yesterday.The resignations will have no direct impact on the viability of the caretaker government since Olmert can appoint new ministers to serve until the national election.

Dan WILLIAMS