Leading article: Squandering good faith

With Israel's withholding of Palestinian custom revenues and yesterday's decision by the European Union to suspend aid payments to the Palestinian Authority, a twin squeeze on the Hamas government is in operation. Without these two sources of income, there is little chance of the PA's employees being paid. Continuing payments to Hamas - which is still considered by the EU to be a terrorist organisation - would not have been a decision for the EU foreign ministers to take lightly. But cutting off aid is far more dangerous.

EU officials were keen to stress that humanitarian assistance to the Palestinian people will continue. But the distinction is somewhat bogus. Stopping the salaries of civil servants will do grave damage to the PA's ability to provide basic services such as education and heath care. This may not result in a humanitarian disaster, but it will do terrible damage to civil society in the West Bank and Gaza. The result will be chaos and the further radicalisation of Palestinian society. This is not in the interests of either Israel or the EU.

The purpose of this boycott is apparently to persuade Hamas, which formally took power last month, to alter its founding charter to recognise Israel and renounce violence. The chances of this happening are remote, to say the least. And there is a more fundamental reason why this was a foolish decision. Whether the EU, America, Israel - or any other country - likes it or not, Hamas is a democratically elected government. There is a grave danger that the West will now be perceived as punishing the Palestinians for making the "wrong" choice in their January election. This decision also tears up the last scraps of the Oslo agreement, which made the provision of basic services in the Occupied Territories the Palestinians' responsibility. Thanks to yesterday's decision, the EU's credibility as an honest broker is in doubt.

Refusing to deal with Hamas is a blind alley, whether for Israel or the wider world. Israeli unilateralism will not solve anything. If Israel attempts to define its eastern border by the West Bank separation barrier, a third of the PA's internal economy would be choked off. Under those circumstances the PA could never be a peaceful neighbour. A negotiated, two-state settlement remains the only way forward.

If it cannot bring itself to negotiate with a Hamas government directly, Israel should at least deal with the Palestinian President, Mahmoud Abbas. As for the EU, it should reverse this counter-productive move as soon as possible. At this sensitive moment, constructive proposals, not crude ultimatums, are called for.