Israel's cabinet approved a set of punitive measures against the Palestinian National Authority ( PNA) on Sunday, one day after the new Hamas-dominated Palestinian parliament was sworn in.

The measures include a halt of monthly transfer of tax revenues to the PNA Israel collects on its behalf, which the Palestinian President Mahmoud Abbas said will plunge the Palestinian government into a serious financial crisis.

"The next payment is to be made in early March, and it won't take place," government spokesman Asaf Shariv said.

Hamas leader Ismael Haneya, who was nominated as the new Palestinian Prime Minister on Sunday, said that Israel's decision "does not scare the Palestinian people."

Haneya said Israel's new sanctions "were meant to force the Palestinians down to their knees", and the Palestinians would face any challenges.

Israel collects some 50 million U.S. dollars of tax payment on behalf of the PNA each month and is liable to transfer the money to the PNA, which uses the money to pay salaries of 140,000 government employees.

Hamas' new parliament speaker Abdel Aziz Dweik denounced the move as a political ploy ahead of Israel's parliamentary elections on March 28. "This is a wrong decision, and the Israelis must reconsider it," he said.

Under such circumstances, Hamas said that it would try to make up for monetary shortfall partially by raising money from the Arab and Muslim world.

The head of the Arab League Amr Moussa said on Sunday that Arab governments were considering providing the new Palestinian government with enough money to make up for the funds Israel plans to withhold.

During Sunday's cabinet meeting, Israeli Acting Prime Minister Ehud Olmert also ruled out any contact with Hamas and a future Hamas-led Palestinian government, which he said would become a " terrorist entity."

"It is clear that given the Hamas majority in the Palestinian

parliament and the fact that the role of forming a government has been given to Hamas, the Palestinian (National) Authority is

effectively becoming a terrorist authority," Olmert said.

The cabinet also called on the international community to withhold aid to the PNA except for humanitarian purposes.

Olmert assured that Israel would allow humanitarian aid to reach the Palestinians, saying that Israel had "no intention to impinge on the humanitarian needs of the Palestinian population."

But the cabinet did not approve bans proposed by the Defense

Ministry on the Palestinian travel between the Gaza Strip and West Bank and on Palestinian workers from entering Israel.

Instead, the government decided to continue military actions against Palestinian militants and intensify security measures at

checkpoints and Israeli-Palestinian crossings.

Hamas, or the Islamic Resistance Movement, won 74 out of 132 seats in the Palestinian Legislative Council in the Jan. 25

elections, defeating the long-dominant Fatah movement which got 46 seats.

The militant group, sworn to Israel's destruction, has rejected Western threat to cut off aid unless it renounces violence, recognizes Israel and accepts existing agreements including roadmap peace plan.

Source: Xinhua