CAIRO, June 17: Palestinian president Mahmud Abbas said on Saturday a European Union funding mechanism for the cash-strapped Palestinians was ‘not adequate’ after a meeting with Egyptian President Hosni Mubarak in Cairo.

“The mechanism is I believe not adequate because the funds must go through the government,” Mr Abbas told reporters, referring to how under the EU plan the funds are to be channelled away from the Hamas-led government.

“Though we consider this a step forward, it is not enough at all because it cancels the role of the government and cancels the role of the Palestinian Authority,” he said.

European Union leaders endorsed on Friday a new funding mechanism for the cash-strapped Palestinians set to come into operation next month and through which the EU plans to channel a substantial aid package.

The EU commission has been trying to design a mechanism that would funnel much needed funds to the Palestinians without the money going to the Hamas-led government.

The Islamist movement, which swept to power in March, has so far rejected Western demands that it recognise Israel and past peace deals, prompting the European Union — its biggest aid donor — and the United States to suspend direct aid.

This prompted a financial crisis in the Palestinian territories, which were then engulfed by political turmoil as deadly clashes between supporters of Hamas and Abbas’s ousted Fatah faction erupted in the Gaza Strip.

Mr Abbas rejected any talk of naming a new prime minister to replace incumbent Ismail Haniya as a way out of the crisis. “It is still too early to talk about this,” he said.

He said that talks are still in progress between the two sides over a document drawn up by Palestinian prisoners in Israeli jails which proposes a final settlement with Israel of two states living side by side.

“We are currently in talks, which began in Ramallah and are currently taking place in Gaza to discuss the document of the detainees,” said Mr Abbas.

Mr Abbas and the Hamas-led government have been locked in crisis since Mr Abbas announced a July 26 referendum on the blueprint, pending a cross-party agreement.

“The referendum is still a possibility,” Abbas said. “But it is not our goal, it is better for us and for the Palestinian people if we agree.”

The document calls for a national unity government, an end to attacks in Israel and the creation of a Palestinian state alongside Israel on land conquered by the Jewish state in 1967.

If accepted, the blueprint would undercut Hamas’s long-time platform of refusing to recognize Israel or disavow the use of violence even within Israeli borders, as well as bounce it into a coalition government with Fatah.

For its part, Egypt chose not to comment on the significance or implications of the referendum.

“This is an internal Palestinian affair,” said Soliman Awad, the Egyptian presidency spokesman.

Awad also said that Mubarak, who met with Israeli Prime Minister Ehud Olmert in the Red Sea resort of Sharm el Sheikh earlier this month, was preparing to host a three-way summit bringing together Olmert and Abbas, though he did not specify a date for the meeting.

“There is communication between Egypt and the Quartet to prepare for a summit in Sharm el Sheikh like the one that brought together president Abbas and former prime minister (Ariel) Sharon in February last year,” Awad told reporters.

Olmert has said he planned to meet Abbas towards the end of June.

Peace talks are within the remit of Abbas rather than the Hamas-led government, but Olmert has said the moderate Palestinian leader cannot be used as a fig-leaf for a movement committed to the destruction of the Jewish state.

Abbas’ visit to Cairo comes as part of a regional tour which will take him to Jordan to meet with King Abdullah II on Sunday.—AFP