A week of armed clashes between the two leading Palestinian factions, radical Islamic movement Hamas and pro-presidential Fatah, left at least 100 people dead in Gaza and ended up with Hamas seizing control over Gaza. The West Bank, a more expansive territory, remains in the hands of Fatah.
"We will lift the freeze on [Palestinian] funds that we have kept under our control because we did not want them to be used by Hamas for terrorist activities," the Jerusalem Post quoted Ehud Olmert as saying during the first day of his visit to the United States.
"We will do everything possible to improve living conditions on the West Bank," he said in New York.
Hamas, which won parliamentary elections early last year, has refused to recognize the state of Israel, which has deprived impoverished Palestinian territories of Western financial aid.
But Palestinian President Mahmoud Abbas dissolved the government led by Hamas's Ismail Haniya, and instructed pro-Western Fatah member Salam Fayyad, formerly a finance minister, to form a new emergency Cabinet.
The Cabinet was sworn in Sunday, and Abbas declared all armed structures linked to Hamas illegal, accusing Hamas of starting the armed rebellion June 10.
Olmert pledged to transfer about $700 million from previously frozen PNA accounts, and lift some travel restrictions currently in force on the West Bank. He also called for broader political dialogue between Israel and Palestine to resolve the protracted Middle East conflict.
"Our goal is to show Palestinians that when they are ready to give up terrorism, we both have a real chance for a better life," the Israeli premier said.
Meanwhile, Israeli Foreign Minister Tzipi Livni called Monday for increased international pressure on Hamas and support for Fatah leader Mahmoud Abbas.
"We support an agreement with Abbas and moderate Palestinians," Belgian radio Contact quoted Livni as saying during her current visit to Luxemburg. "We must go through different phases to guarantee that the Palestinian state does not become a terrorist state in the future."
A quartet of mediators in the Middle East conflict, which comprises Russia, the European Union, the United States and the United Nations, agreed Sunday that the Palestinian leader's decision to dissolve a coalition government and form an emergency Cabinet was legitimate.
