Few political parties more fully deserved to lose a democratic election than Fatah, the corrupt, ramshackle Palestinian faction that has held a virtual monopoly on power since the Palestinian territories won a measure of self-government. Fatah’s comprehensive defeat at the hands of Hamas, in elections that all international monitors agreed were fair, reflect the anger and frustration of 1.3 million Palestinian voters at the feuding, mismanagement and corruption of the late Yassir Arafat’s cronies who have dominated the Fatah-led governments in the West Bank and Gaza. The electors have seen the ministerial villas amid the Gaza slums. They have suffered from the lawlessness. And they have seen huge sums donated from abroad squandered while the Palestinian economy stagnated. This is Arafat’s true legacy.

Little wonder, therefore, that voters turned instead to Hamas, the Islamic militant group committed to the destruction of Israel. Swiftly learning the populist tricks of electioneering, Hamas ran an effective campaign. It played down its militant philosophy and played up its role in providing schools, clinics and welfare support for Gaza’s slum-dwellers. Despite clashes with rival factions, it exercised restraint on polling day to win more than half the seats in the 132-member parliament in a turnout of 78 per cent. Ahmad Qureia, the Prime Minister, and his Cabinet promptly resigned.

The Hamas win is, nevertheless, a huge blow to the peace process, arguably far more serious than the incapacitating stroke of Ariel Sharon, the Israeli Prime Minister. Israel, the US and Europe have said that they will have nothing to do with Hamas unless it renounces violence and recognises Israel’s right to exist. But effective government by the Palestinian Authority (PA) is impossible without a myriad of daily interactions with the Israelis. It is not only water supplies, fiscal stability, trade and movement that are intertwined with Israel; but Palestinians’ chances of working inside Israel, getting through security barriers or leaving the country are wholly dependent on the overall security relationship.

Hamas may hope to concentrate at first on cleaner, more transparent government. It will soon find that without Israeli co-operation it can deliver almost nothing. Even if it no longer sponsors suicide bombings — it has carried out nearly 60 such attacks since 2000 — Hamas risks Israeli military retaliation and international isolation if it makes no effort to halt terrorist operations by its supporters or, crucially, by Islamic Jihad, the rival organisation that boycotted the elections. Much depends on its security policy and on whom it appoints to office.

How should the world react? Arab governments forecast, lamely, that Hamas will become more moderate and should be treated as any election winner. The West, which has long urged greater democracy in the region, accepts that an election verdict, however uncomfortable, must be accepted — but not, as Condoleezza Rice said yesterday, if Hamas has one foot in politics and one in terror. Europe must not settle for a messy verbal compromise on relations with Israel. As the largest provider of funds for the PA, the European Union has, for too long, turned a blind eye to embezzlement. If Hamas can provide cleaner government while abjuring violence, Europe can continue support. If it does neither, both funding and acceptance should be promptly withdrawn. The EU funded Arafat’s corruption. It must not finance Hamas terrorism