The U.S. State Department said on Tuesday that it would not deal with the new Palestinian unity government unless it met three conditions it had specified in the past and so far, it seems that the Palestinians are not complying with the demands.

U.S. Assistant Secretary of State for Near Eastern Affairs David Welch said Washington would only deal with a new unity government if it met three conditions laid down by the Quartet of Middle East mediators -- renounce violence, recognize Israel and abide by past Israeli-Palestinian accords.

"We have not seen all the details (of the new government) and we are taking a look, a close look at it. To the extent that we understand this so far, it does not meet the standard," Welch told reporters in an interview.

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Jordan's King Abdullah II on Tuesday met with Palestinian Authority Chairman Mahmoud Abbas, hailing the new Palestinian unity government as a move which could help "break the deadlock" in the Middle East peace process.

"The success of efforts aimed at forming a national unity government will help break the deadlock engulfing the peace process and boost the Palestinians' stand in dealing with the big challenges lying ahead," the Jordanian royal court said in an official statement.

Abbas' Fatah movement and the Hamas-led government on Tuesday reached an agreement on the broad policy outlines of a new Palestinian unity government, according to PA reports.

Abbas briefed Abdullah on the outcome of talks he held in recent days with Palestinian Prime Minister Ismail Haniyeh for the establishment of a coalition government "capable of shouldering the burdens of the coming stage and regaining the legitimate rights of the Palestinian people," the statement said.

"We have surmounted the hurdles, but we are at the beginning of the road and we do need time," Abbas said in remarks to Jordanian television.

"After the present government resigns, a personality will be asked to form a new cabinet that comprises all shades of the political spectrum - Hamas, Fatah, other factions and independent politicians," he added.

Hamas and Fatah have been involved in power struggles since the January elections, when the fundamentalist Hamas group scored a landslide victory.

The failure of the Hamas-led government to recognize Israel has sparked a series of Israel Defense Forces and financial sanctions that have thrown the PA into financial hardship.

The United States and the European Union responded to Hamas' surprise election victory in January by cutting off economic aid to the PA.

"The forthcoming months will be crucial for the Palestinian question," the royal court statement quoted King Abdullah as saying.

"Efforts should be intensified to ensure the resumption of the peace talks between Israel and the Palestinians," he added.

Haniyeh: Talks with Israel have to do with the PLO, not the government
Prime Minister Haniyeh of Hamas on Tuesday poured cold water on any hopes a new unity government might seek peace talks with Israel.

Asked by Reuters if the new administration would negotiate with Israel, Haniyeh said: "No. Negotiations have to do with the PLO and not with the government."

Haniyeh, who is likely to head the new government, has previously said he would not object to Abbas negotiating with Israel. A spokesman for the current Hamas government reiterated that position earlier on Tuesday.

Earlier Tuesday, a government spokesman said that the new PA coalition will have "no problem" holding peace talks with Israel over pre-1967 war borders, and that the Palestinians are ready for an independent state in territories captured by Israel in 1967.

But Hamas was not speaking in terms of the "end of the conflict," the spokesman, Ghazi Hamad, told Army Radio.

Speaking in Hebrew, Hamad also said the Israel, responding to the expected platform of a new Palestinian unity coalition, insists that the agreement does not meet the international community's conditions for ending its embargo of the PA, and that there is no basis for talks with the new Hamas-Fatah government.

Abbas and Haniyeh concluded the parameters for establishing a national unity government late Sunday night, Hamas and Fatah sources confirmed to Haaretz on Monday.

"We have no problem with the government holding negotiations with Israel, but we have demands, the 1967 borders, refugees," Hamad said.

Asked if that meant that Hamas had no problem recognizing the 1967 borders, Hamad said, "Yes. We have no probnlem with that."

Hamad was then asked if that would mean the end of the Israeli-Palestinian conflict. "That's not what we're saying. We have no problem accepting a state with the 1967 borders."

Abbas is expected to announce the dissolution of the current government during the next 48 hours and invite Hamas's Haniyeh to form a new government.

Israel, however, is preparing a diplomatic offensive to ensure that the new government is not recognized by the international community unless the three conditions set by the Quartet are clearly met.

The Quartet - the United States, European Union, United Nations and Russia - has said that it will not recognize the Hamas government elected last February unless it recognizes Israel, relinquishes violence and accepts previous agreements between Israel and the PLO.

Well-placed sources in Washington said that the Bush administration shares Israel's concern that the international community's stance on recognizing the Palestinian government may now depart from the conditions set by the Quartet.

According to the Abbas-Haniyeh agreement, the new Palestinian government will include ministers from Hamas, Fatah, and other factions, as well as technocrats. Palestinian analysts said that Hamas will agree to give up some key ministries, including Finance and Foreign Affairs, while a Fatah representative from the West Bank will be appointed deputy prime minister. But Hamas will seek to retain the Education, Health and Interior Ministries.

The breakthrough in the Abbas-Haniyeh talks came after the Hamas leader agreed to indirect recognition of Israel, senior Hamas sources said. He did this, they added, by adopting the Arab peace initiative as the basis for the new government's diplomatic platform.

The peace initiative, based on a Saudi Arabian proposal in March 2002, states that Arab states will recognize Israel if it withdraws to the 1967 borders and resolves the refugee problem.

However, Hamas's spokesman in the Gaza Strip, Sami Abu Zuhri, insisted Monday that the organization would never recognize Israel, even if the national unity government did.

It is this uncertainty over whether the new government will unequivocally meet the Quartet's conditions that has motivated Israel's Foreign Ministry to prepare a diplomatic offensive insisting that the terms be met in full.

"If the Palestinian government does not clearly accept the three conditions, we will not hold negotiations with it, nor will we renew the transfer of tax revenues," a senior Israeli Foreign Ministry source said Monday.

According to experts at the Foreign Ministry, the worst possible scenario for Israel is one in which the international community recognized the Palestinian government even though it had not met the Quartet's conditions.

Abbas announced in the Gaza Strip Monday that the new government's diplomatic platform will be based on the Prisoners' Document, a joint manifesto by Hamas and Fatah leaders in Israeli prisons. A senior Hamas legislator, Salah al-Bardawil, confirmed that the new government's platform will be based on the Prisoners' Document and on the Arab Peace initiative, which, he said, "will have a role in any future diplomatic process."

Bardawil added that Abbas and Haniyeh discussed the Quartet's conditions for recognition during their meeting Sunday night, but said: "It is not possible for the Quartet to determine the Palestinians' national political program." However, he continued, "everything is open for discussion."

FM Livni heads to Washington
Foreign Minister Tzipi Livni left Tuesday for Washington, where she will hold talks with Bush administration officials in an effort to garner American backing for Israel's demand that no recognition be forthcoming before the Quartet's terms are met.

During a meeting with visiting Spanish Foreign Minister Miguel Moratinos Monday, Livni said that Abbas has two options: accept the three conditions, which would open the way for talks, or continue the current policy and face lack of progress.

"This is the time for the international community to prove its mettle with regard to the conditions," she told her Spanish colleague.

Vice Premier Shimon Peres, during his meeting with Moratinos, also expressed pessimism that a Palestinian unity government would meet the international community's conditions. "Even if this did occur, it is doubtful that such a government would last long," he added.

This view was echoed by senior Fatah members in the West Bank, who predicted that the government would collapse in a few months.

"[Hamas] will enjoy the best of both worlds, while we in Fatah will become partners in failure," said one. "Now, if salaries are not paid and the security chaos continues, they will also blame Fatah. In essence, Abu Mazen [Abbas] has saved them from collapse."

Abbas congratulated the Palestinian people on the agreement to form a unity government and called on all civil servants to resume their work and end strikes.