JERUSALEM, Feb 5: Israel agreed on Sunday to make a crucial payment of about $54 million to the Palestinians, but officials said future transfers will be halted once Hamas militants form the next Palestinian government.

The decision was taken shortly after a flare-up of violence. Israeli forces pounded the northern Gaza Strip with missiles and artillery fire, killing three Palestinian militants. Hours later, a Palestinian assailant killed one woman and wounded four other people in what police said was a politically motivated stabbing rampage in central Israel.

Israel collects millions of dollars in taxes and customs duties for the Palestinians, transferring the funds to the Palestinian Authority every month. Israel delayed the most recent payment last week to protest Hamas’s recent victory in Palestinian legislative elections, deepening a financial crisis for the cash-strapped Palestinian Authority.

Ahead of Sunday’s government vote, Israeli Cabinet minister Zeev Boim said the money was being transferred because Hamas is not yet part of the Palestinian government.

In approving the payment, the cabinet said it would review the payments each month. But Boim said the funds would be cut off if Hamas, which has killed hundreds of Israelis in suicide bombings, does not change its ways.

A freeze on the monthly money transfers would add to growing pressure on Hamas to moderate its violent ideology. The US and Europe have threatened to cut off tens of millions of dollars in Western aid to the Palestinians if Hamas does not ‘renounce violence’.

So far, Hamas has rejected the calls and responded to the threats by soliciting more money from the Arab and Muslim world. Under Palestinian law, Hamas has until early April to cobble together a new government, although officials say they expect to complete the task before the end of this month.

Mushir al Masri, an incoming Hamas lawmaker from Gaza, termed Israel’s payment freeze ‘theft’ and said threats of cutting off money from a Hamas-led government would not ‘blackmail’ the militant group.

He said the group had other resources to tap. Hamas leaders set off on a tour of Muslim states on Sunday to try to drum up financial and political support.

Mohammed Abu Teir, another incoming Hamas lawmaker, said the group already has lined up $100 million in funding from an Arab country. “They are ready for us,” he said, declining to identify the donor.

The money turned over by the Israelis _ collected under existing Israeli-Palestinian accords _ pays for a large chunk of the Palestinian Authority’s payroll of 137,000 government workers.

Last week, the Palestinian government failed to pay its monthly salaries because its coffers are empty. Failure to meet the payroll could lead to widespread layoffs and ignite violence in an already volatile area. —AP