The EU has said it will resume direct aid to the Palestinian Authority to support the new Fatah-led government.
The decision came after Israel and the US both publicly backed the new emergency cabinet, set up after Hamas seized control of the Gaza Strip.
Israel says it will release tax revenues frozen since Hamas won elections in January 2006.
Palestinian leader Mahmoud Abbas has spoken to US President George W Bush, urging him to push for new peace talks.
Mr Bush called the Palestinian Authority president to offer his support for the new government, said Mr Abbas's office.
Mr Abbas reportedly told the US leader that without Hamas in government, the time was now right for a new peace effort.
The decision came after Israel and the US both publicly backed the new emergency cabinet, set up after Hamas seized control of the Gaza Strip.
Israel says it will release tax revenues frozen since Hamas won elections in January 2006.
Palestinian leader Mahmoud Abbas has spoken to US President George W Bush, urging him to push for new peace talks.
Mr Bush called the Palestinian Authority president to offer his support for the new government, said Mr Abbas's office.
Mr Abbas reportedly told the US leader that without Hamas in government, the time was now right for a new peace effort.
Israeli leaders offered strong public support for Mr Abbas' new government.
Speaking in New York, Prime Minister Ehud Olmert said he would consider the new Palestinian government as a "genuine partner".
Foreign Minister Tzipi Livni confirmed the decision to release tax revenues at a meeting of EU foreign ministers in Luxembourg.
"We are willing to work with those who support the two-state solution - those who understand and accept the right of Israel to exist," she said.
Meanwhile, in Gaza, there were reports that the territory's 1.3 million residents could face shortages of food and other essential supplies once current Israeli supplies run out.
But an Israeli fuel company, Dor Alon, said it had restored normal fuel supplies to the Gaza Strip after Palestinians protested against an earlier suspension.
Speaking in New York, Prime Minister Ehud Olmert said he would consider the new Palestinian government as a "genuine partner".
Foreign Minister Tzipi Livni confirmed the decision to release tax revenues at a meeting of EU foreign ministers in Luxembourg.
"We are willing to work with those who support the two-state solution - those who understand and accept the right of Israel to exist," she said.
Meanwhile, in Gaza, there were reports that the territory's 1.3 million residents could face shortages of food and other essential supplies once current Israeli supplies run out.
But an Israeli fuel company, Dor Alon, said it had restored normal fuel supplies to the Gaza Strip after Palestinians protested against an earlier suspension.
'Direct relationship'
The EU and US imposed an embargo on the previous government after Hamas won a surprise election victory 18 months ago.
Speaking in Luxembourg, Mr Solana said the EU would be prepared to make some direct payments to the government of the new Palestinian Prime Minister, Salam Fayyad, in the future. Mr Fayyad, widely respected among international organisations and donors, served as finance minister in the previous administration.
"It is very important that he is able to construct a budget, and through that budget he will be able to help both people in Gaza and the West Bank," Mr Solana said.
Mr Solana added that the EU also planned to deliver economic aid to Palestinians in Gaza but for the moment would continue to channel money through a temporary mechanism that bypasses Hamas.
"In order to help the Palestinian people in Gaza, we will need some mechanism that cannot be direct support," he said.
The EU, the biggest donor to the Palestinians, continued humanitarian aid during the ban on contact with the former Hamas-led government.
The EU and US imposed an embargo on the previous government after Hamas won a surprise election victory 18 months ago.
Speaking in Luxembourg, Mr Solana said the EU would be prepared to make some direct payments to the government of the new Palestinian Prime Minister, Salam Fayyad, in the future. Mr Fayyad, widely respected among international organisations and donors, served as finance minister in the previous administration.
"It is very important that he is able to construct a budget, and through that budget he will be able to help both people in Gaza and the West Bank," Mr Solana said.
Mr Solana added that the EU also planned to deliver economic aid to Palestinians in Gaza but for the moment would continue to channel money through a temporary mechanism that bypasses Hamas.
"In order to help the Palestinian people in Gaza, we will need some mechanism that cannot be direct support," he said.
The EU, the biggest donor to the Palestinians, continued humanitarian aid during the ban on contact with the former Hamas-led government.
BBC News
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