Israel, the West Bank and Gaza.
Palestinian President Mahmoud Abbas, emboldened by an outpouring of international support in his showdown with Hamas militants, on Monday told a receptive President Bush that it was time to restart Mideast peace talks.
Bush planned to relay their thoughts on how to proceed to Israeli Prime Minister Ehud Olmert at a meeting in Washington on Tuesday, a White House spokesman said.
Meantime, Israel's parliament on Monday confirmed the appointment of Ehud Barak as defense minister, consolidating the political comeback of the former prime minister. He returned to power six years after a humiliating election defeat ended his short term as prime minister and sent him into the political wilderness.
He enters the post after the militant Islamic Hamas takeover of the Gaza Strip, wresting control from the rival Fatah last week in brutal and bloody street fighting. This has raised Israeli concerns of an increase in Palestinian rocket attacks and armed incursions from Gaza into nearby southern Israel.
Palestinian President Mahmoud Abbas' installation of an emergency government got a significant boost Monday, with the U.S. and the European Union promising to restore hundreds of millions of dollars in crucial aid.
Secretary of State Condoleezza Rice said she told Abbas that the U.S. will lift the financial and political restrictions imposed when the Islamic Hamas movement gained political power 15 months ago.
"I told the prime minister that we want to work with his government and support his efforts to enforce the rule of law and to ensure a better life for the Palestinian people," Rice said at a news conference in Washington, D.C.
"We intend to lift our financial restrictions on the Palestinian government, which has accepted previous agreements with Israel and rejects the path of violence. This will enable the American people and American financial institutions to resume normal economic and commercial ties with the Palestinaian government."
Rice said the White House will ask Congress to restructure $86 million in aid that had been designated for Abbas' security forces. She also said the U.S. plans to give $40 million to the United Nations to help Palestinians, particularly those in the Hamas-controlled Gaza Strip.
Rice made a firm distinction between Abbas' Fatah movement and Hamas, which had been part of a coalition government until Hamas fighters seized control of Gaza, leaving the Palestinian president in control of only the West Bank.
Hamas was trying to "impose its extremist agenda on the Palestinian people," Rice said. "Through its actions, Hamas has sought to divide the Palestinian people."
The EU, which traditionally has been the Palestinian Authority's largest donor, also said it would reinstate aid.
Meanwhile, Abbas of Fatah dissolved the National Security Council on Monday in a further bid to weaken the rival Hamas group.
The council was formed as part of the governing alliance Hamas and Fatah set up in March, in a bid to divide security responsibilities between the factions. But disputes over control of the powerful security forces were never resolved, and the council never met.
Last week, the internal strife between Hamas and Fatah degenerated into civil war, and Hamas took over Gaza. Last week, as Fatah was ousted, Prime Minister Ismail Haniyeh of Hamas was sworn in, effectively dissolving Abbas' government in the territory.
On Sunday, Abbas hurriedly swore in the new Cabinet, days after the unity government was toppled.
The rift has left the Palestinians with two rival governments — a Fatah-allied government in the West Bank and the Hamas leadership in Gaza. Abbas seeks peace with Israel, whereas Hamas is sworn to the Jewish state's destruction.
Underscoring the convoluted political solution, the dueling Palestinian Cabinets had separate meetings in the West Bank and Gaza on Monday. The dispute has endangered the Palestinians' goal of forming an independent state in the two territories, which are located on opposite sides of Israel.
The international community has largely rallied behind Abbas' government, led by Prime Minister Salam Fayyad, an internationally respected economist.
In a major boost to Abbas, EU foreign policy chief Javier Solana announced in Luxembourg on Monday that the 27-nation bloc would resume direct financial aid to the Palestinian Authority now that Hamas is no longer part of the government.
"We absolutely have to back" the new government in the West Bank, said Luxembourg Foreign Minister Jean Asselborn. "The question of today is: How can we help the 1.4 million people in Gaza?"
The United States, another major donor to the Palestinians, has said it will end its financial embargo, while Israel has signaled that it too will ease sanctions on the Palestinians. Israel collects some $55 million a month in customs duties on behalf of the Palestinians, but has withheld the funds since Hamas took power.
From NPR reports and The Associated Press