A leading British charity has called on the European Union to resume sending aid to the Palestinian government.

Oxfam said in a report that the year-long boycott of the Hamas-led government has seen poverty levels rise by 30% while basic services faced a meltdown.

This situation, it said, may prevent a two-state solution with Israel.

Oxfam said the EU should not miss what it called an opportunity to restore the faith of the Palestinian people in the Europeans' role as an honest broker of the Middle East peace process.