ISRAEL: Israel suspended formal security ties to the Palestinian government yesterday in what Hamas said amounted to "a declaration of war".
European Union foreign ministers added to US and Israeli pressure on the Islamic militant group by approving a temporary halt in direct EU aid to the new government.
Thousands of Palestinians poured onto the streets of Gaza, protesting against Western aid cuts and a increase in Israeli military strikes since election victor Hamas took control of the Palestinian Authority in late March.
An Israeli shell killed a young Palestinian girl and injured 12 others, including five children, when it hit a house in the northern Gaza Strip, Palestinian officials said.
Israel says the shelling in Gaza is meant to combat rocket attacks by militants.
Avi Dichter, a top adviser to interim Israeli Prime Minister Ehud Olmert, told Israel Radio that a ground assault of Gaza could not be ruled out.
"We have done it in the past and can do so in the present," said Mr Dichter, a former secret intelligence chief who may be appointed to a senior security post in Mr Olmert's new cabinet.
In statements issued in quick succession yesterday, President Mahmoud Abbas and Hamas denounced Israel for branding the Palestinian Authority a "hostile entity".
Mahmoud al-Zahar, foreign minister in the new Hamas government who has a reputation as a hardliner, said in a statement that the European Union decision was "unacceptable" and "collective punishment against the Palestinian people".
Mr Zahar added that the Palestinian people would not succumb to the international pressure and would remain committed to their goal of establishing an independent Palestinian state with Jerusalem as its capital.
Hamas spokesman Sami Abu Zuhri said in a statement that Israel's decision to sever contacts with the Palestinian Authority constituted "a declaration of war and a failed attempt to cause internal divisions among Palestinians".
In the West Bank city of Ramallah, Mr Abbas said Israel's position "completely violates the agreements we have signed with them and violates international law".
"We demand from this Israeli government to stop such measures," said Mr Abbas, whose Fatah faction was crushed by Hamas in an election in January.
Having ruled out contacts with the Hamas-led Palestinian Authority, the Israeli army moved yesterday to suspend remaining security co-ordination.
At a joint co-ordination office near the West Bank city of Jericho, Palestinian Col Khaled Ziyar and his men piled their belongings on to a pick-up truck and turned keys to the facility over to the Israelis.
Before they drove away, the Palestinian officers took down posters of Mr Abbas and a Palestinian flag.
The Jericho district co-ordination office, located on the outskirts of the ancient town, was the last security facility to be manned by both Israelis and Palestinians. In other parts of the West Bank, co-operation was done by telephone.
As part of its new policy, Israel blocked Brig Gen Ala Hosni, who heads the Gaza police, and several other officials from moving between Gaza and the West Bank.
Many Palestinians who lined up to get travel permits at civil administration offices in the West Bank were turned away, witnesses said. At an earlier protest, Palestinian children threw eggs at UN offices in Gaza.
Hamas is sworn to destroy Israel but has largely abided by a year-old ceasefire that other militant groups have ignored.
Israel and the United States have vowed not to deal with Hamas unless it recognises the Jewish state's right to exist, renounces violence and accepts interim peace deals. Hamas says talks with Israel would be futile.
Israel has stopped transferring tax revenues to the Palestinians.