Israel has sealed its borders with the West Bank and Gaza Strip

Israel Releases Funds to Palestinian Authority

The Israeli decision is seen as a first step towards easing tensions. But the Palestinians have dismissed it as inadequate.

It follows a meeting between the Israeli, Palestinian and American security officials to discuss closer cooperation. Israel had made this a condition for releasing the money.

Under the Oslo peace accords, Israel must transfer to the authority many of the taxes it collects from Palestinians. But after last month's suicide bombings in Jerusalem, Israel suspended handing over the money, and closed off Palestinian areas.

A statement released by Prime Minister Binyamin Netanyahu's office said the decision was the result of "partial cooperation" by the Palestinian Authority in the investigation into the bombing, as well as the stiff sentencing of three Palestinians for the murder of an Israeli taxi driver in the town of Jericho.

An aide to Yasser Arafat said the decision was a "positive first step"

It said that 30 per cent of the funds would be transferred. However, it added: "Israel still expects strident Palestinian action in the war against the terrorist infrastructure, action that has still not been taken".

Nabil Abu Rudaineh, a senior aide to Yasser Arafat, remarked: "It is a positive first step. We hope the Israeli government will lift the siege measures, including the transfer of the remainder of the money owed."

Israel's closure of the West Bank and Gaza Strip has hit the Palestinian economy hard. Around 100,000 Palestinian workers have been unable to get to their jobs inside Israel. On Sunday, the Palestinian Authority pledged to begin a boycott of Israeli products.

The decision was also welcomed by the United States, which had criticised Israel for withholding the funds. A State Department spokesman said: "We welcome any Israeli effort to reconcile the Palestinian economy's well-being with their own understandable concerns about security."

The Americans have been trying to steer Israel and the Palestinians into an investigation of the Jerusalem bombings. The three sides met on Sunday in an atmosphere that was described as very positive. The Palestinian security chief, Jibril Rajoub, later confirmed that Israel had been given some explosives found last month in a bomb factory in the West Bank town of Beit Sahour.

Israeli officials then tested the explosives to see if they matched those used in the Jerusalem bombings. Mr Rajoub said he had not yet heard whether a match had been established.

Palestinian officials insist that the two bombers did not come from within the Palestinian Authority's territory. They say that the bombers came from abroad, although they have not identified the country of origin.

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