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Norway quickly announced that it would now recognise the Fatah-Hamas government, Foreign Minister Jonas Gahr Stoere saying in Oslo he was satisfied the unity government had taken sufficient steps towards meeting international conditions for acceptance.

Russia and France have also indicated a willingness to work with the Fatah-Hamas coalition.

Arab countries including Syria, Jordan, Qatar and Yemen called for the aid freeze to end, and the internationally respected new finance minister, Salam Fayyad, said the Palestinian government would not survive without international aid.

New foreign minister Ziad Abu Amr lashed out at Israel's continued rejection of the unity government, the first cabinet to include both Fatah and Hamas.

"The Israeli government is weak and is running away from negotiations by clinging to old irrational positions," he told AFP.

Although the United States has withheld judgment on the unity government, Israeli officials quietly fear some Quartet members will now end the aid freeze as the Palestinian economy continues to nosedive.

"We feel that the wind is beginning to change among certain European countries who seem ready to restart their aid, which would constitute a victory for Hamas," a senior Israeli foreign ministry official told AFP on condition of anonymity.

In Berlin, the German presidency of the European Union said it was prepared to cooperate with a legitimate Palestinian government which would adopt a platform in line with internationally set conditions for Middle East peace.

"The Presidency of the EU recalls the readiness of the EU to work with and to resume its assistance to a legitimate Palestinian government adopting a platform reflecting the Quartet principles," Germany said in a statement.

"The EU will carefully assess the platform and actions of the new government and its ministers."

On the streets of Gaza City, the unity government was welcomed.

Sadi Shurab, 36, who works for the Palestinian Authority said: "We hope this government... ends the chaos and the economic boycott. We hope it returns salaries to the government employees and provides work for the unemployed."

And 21-year-old Abd al Wahab Salim said: "I am happy with the announcement of the unity government, but I don't feel like partying... I want a life of dignity without fear."

The new interior minister Hani al-Qawasmeh told AFP: "The first mission for us... is to work immediately to provide security and stability in the Palestinian territories so that the citizen feels comfortable, safe and secure."

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