Abbas appoints new PM as Hamas holds Gaza

Palestinian President and Fatah leader Mahmoud Abbas has appointed a new Prime Minister to lead the emergency government which will replace the dissolved unity coalition.

Former finance minister Salam Fayyad will now lead the government, despite a Hamas announcement that it will ignore the move.

Hamas leader Ismail Haniyeh described the announcement as 'worthless' raising the prospect of rival Palestinian governments.

Hamas is now in full control of Gaza, while the Fatah movement retains its powerbase in the occupied West Bank.

The dramatic takeover, branded a 'military coup' by Mr Abbas, effectively splits Palestinians into two separate entities and has thrown into jeopardy any prospect for a future Palestinian state and peace with Israel.

Masked gunmen overran all Fatah security strongholds and hoisted the green flags of Hamas across Gaza, where at least 113 people have been killed in intense fighting over the past week.

Israel has closed all border crossings until further notice, sealing the territory off from the outside world.

However, the US, Israel and European states are preparing to ease sanctions in the West Bank to try to bolster Mr Abbas' emergency government.

Israeli Prime Minister Ehud Olmert and US President George W Bush will discuss a series of 'gestures' at a meeting next week.

It is understood this could include the release of a portion of the Palestinian Authority's tax revenues currently being withheld by Israel.

Up to €300m in Palestinian tax revenues could be transferred, short of the €525m sought by Mr Abbas.

Western donors, led by the US, cut off direct financial aid to the Palestinian Authority in March 2006 after Hamas defeated Mr Abbas's Fatah faction in parliamentary elections.