Mahmoud Abbas has delayed setting a date for a referendum on whether the Palestinian government should recognise Israel.

The Palestinian President said this morning that he was giving the Hamas-led government a three day extension until the end of the week to accept a manifesto that implicitly recognises Israel.

Mr Abbas was expected to announce a date for the referendum this morning, after talks with the militant Islamist group broke down just before a midnight last night. But after a meeting with the PLO Executive Committee this morning, officials said the deadline had been extended to Friday.

"Before the end of the week, President Abbas will hold a news conference to announce the holding of the referendum and the beginning of the process for carrying it out," said Yasser Abed Rabbo, a senior PLO official.

"We, of the PLO Executive Committee, have approved his move and therefore Hamas has until the end of the week to change its position."

Hamas opposes the existence of a Jewish state and has refused to accept all previous peace accords and to renounce violence. But with Western aid cut off because of those policies, its election has brought the Palestinian authority to the brink of financial meltdown.

Hamas also strongly opposes holding a referendum, which it says would be illegal so soon after the general election in January. But the group has been wrong-footed by Mr Abbas's proposal for a popular ballot, which, while it would not have any legal force, would increase the authority of the beleaguered president and his Fatah party.

In talks so far, Mr Abbas has refused to accept any changes to an 18-point document negotiated by senior members of Palestinian factions held in prison in Israel. The document accepts a Palestinian state in the West Bank, Gaza Strip and East Jerusalem, implying recognition of Israel next to it.

Earlier, Sami Abu Zuhri, a Hamas spokesman, insisted that the talks must continue, saying that parts of the document were positive, but that Hamas had problems with other parts. Holding a referendum would circumvent the elected government, he said.

"You cannot raise the sword of ultimatum, you cannot raise the issue of a referendum while you are talking about dialogue," he said.

Opinion polls show broad support for the prisoners' proposal, but a vote in favour of it would deeply embarrass Hamas only five months after a landslide election victory in which it successfully highlighted the corruption and inefficiency of Mr Abbas's Fatah government.

Israel says that the 18-point plan is an internal Palestinian matter, but many Palestinians are uneasy about a referendum, fearing an upsurge of violence from Hamas militias if it passes.

Azam al-Ahman, a top Fatah official, said that a referendum victory would bolster the legitimacy of Mr Abbas, and give him the power to push ahead with negotiations on a long-term political settlement with Israel. He said that the Mr Abbas would also consider calling elections for president and parliament if Hamas did not abide by the results of the referendum.

The dispute comes during an increasingly violent power struggle between the two factions. Five people were wounded in two clashes between Hamas and Fatah forces yesterday in the town of Khan Younis in southern Gaza.

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