JERUSALEM: Three days after the formation of a new Palestinian unity government, Israel finds itself at odds with its US and European allies who are signalling a more flexible approach to the Hamas-Fatah coalition.

The new government is creating a more complicated political landscape, featuring both intensified diplomacy and fears of fresh deadlock.

Few expect an immediate return to peace talks or a sudden end to international sanctions against the Palestinian government -- and a shooting attack by Hamas militants on Monday underscored the tough road ahead.

The wounding of an Israeli civilian came shortly after Norway’s deputy foreign minister, making the first visit by a high-ranking Western official to Hamas officials in Gaza, urged the world to follow his nation’s lead in recognising the new Palestinian coalition.

Despite the violence, the Palestinians appear to be on track for greater international acceptance. Although holding back on lifting the aid boycott imposed after the militants of Hamas took power a year ago, both the US and European Union are signalling a willingness to deal with moderate members of the government installed on Saturday.

That is a sharp contrast with the Israelis, who refuse to deal with any member until the new government accepts three conditions previously set by the international community: recognising Israel’s right to exist, renouncing violence and accepting past peace deals.

Israel is lobbying hard for a continuation of the international aid boycott against the Palestinian government because of the failure to meet those demands.

The tough position by Prime Minister Ehud Olmert perplexes some Israelis who see the Palestinian unity government as holding out the best hope for renewing peace talks, which in turn could help Olmert reverse a slide in his poll numbers.

Olmert will likely face a major challenge to his political survival next month when a government commission releases an interim report expected to be sharply critical of his performance before and during last summer’s 34-day war with Hezbollah militants in Lebanon.

Israeli officials appear more concerned about Hamas’ military build-up in Gaza than missing potential peace opportunities, and the military has begun preparing for a major offensive. Israel fears Hamas is using a cease-fire “to rearm, to import weapons and explosives, and to prepare for another round” of fighting, government spokesman Mark Regev said.

Even so, the region is experiencing an upsurge in diplomacy. Secretary of State Condoleezza Rice is about to make her fifth visit in half a year, and Olmert and moderate Palestinian President Mahmoud Abbas have met twice in the past month.

Israel also has expressed tentative support for a 2002 Arab peace initiative expected to be revived at an Arab summit later this month. It calls for full diplomatic relations with the Jewish state in exchange for full Israeli withdrawal from the lands it captured in the 1967 Mideast war.

At the same time, however, Hamas is reaffirming its right to “resistance” -- a code word for violence against Israel that was in stark evidence on Monday from the shooting at the Karni border crossing near Gaza.

The new coalition represents the Palestinians’ best chance to avert civil war, restore vital foreign aid and begin the process of creating their own state alongside Israel.

“Today there were contacts with Norway. Tomorrow Italy. And we are looking forward to the upcoming Arab summit to expand the circle of contacts for this government,” said Ghazi Hamad, a top aide to Palestinian Prime Minister Ismail Haniyeh of Hamas.

Senior Palestinian officials said they will concentrate now on persuading the Bush administration to stop pressuring Arab banks to refrain from transferring money to the Palestinian government.

Micaela Schweitzer-Bluhm, spokeswoman for the US consulate in Jerusalem, said the sanctions are still in effect, even though Washington is not “ruling out the possibility of contact” with individual Palestinian Cabinet ministers.

“We’re going to definitely be judging the Palestinian government by its actions,” she said.

Palestinians argue the evidence of Hamas’ slow turn toward moderation is abundant: halting suicide bombings the past two years, joining the political process, sharing power with Fatah and endorsing the new unity government’s platform that accepts Palestinian statehood in just the West Bank and Gaza Strip -- which some interpret as implicit recognition of Israel.

Cristina Gallach, spokeswoman for European Union foreign policy chief Javier Solana, welcomed the new coalition as a positive development, saying the EU plans to establish “contact with non-Hamas members of the government we have already worked with.”—AP