The United States cut all diplomatic ties with the newly-sworn in Hamas government this evening as it pushed the Palestinian Authority further towards isolation.

An e-mail was sent to all diplomats and contractors directing them to sever contact with Hamas-appointed government ministers, even those who are not members of the Islamist organisation.

Communication will still be permitted with the office of Mahmoud Abbas, the President, and with non-Hamas members of the Palestinian parliament. The order took effect from 6pm (1600 GMT), when the President began to swear in the new 25-member Cabinet.

Analysts say that today's move was a deliberate move to ratchet up pressure on Hamas. The US has already begun manoeuvring to sideline the terror organisation - which swept to a shock landslide victory in elections in January - unless it agrees recognise Israel, renounce violence and abide by peace accords.

The decision will limit a wide range of US programmes, including security co-ordination through the Palestinian Authority’s Interior Ministry.

A US official told Reuters that the ban had been extended to apply to the few independents within the Hamas-led Cabinet because they enjoyed the support of, and were consequently beholden to, the Hamas-appointed Prime Minister, Ismail Haniya.

After other Palestinian factions refused to join a coalition, the victorious Islamist group nominated a Cabinet whose senior members have all been jailed, deported and escaped Israeli assassination. Chief among Mr Haniya’s 24 ministers are Dr Mahmoud al-Zahar, a hardliner, as Foreign Minister, and Said Siyam as Interior Minister. Most others are Hamas members, along with some pro-Islamist independents and technocrats, one woman and one Christian.

American law bars the government from providing direct assistance to any group on the State Department’s list of banned terrorist organisations.

The communication break came after Hamas greeted Israel's election of a centrist-dominated government, led by the Kadima party, as a "declaration of war". A spokesman said that the Israeli electorate’s choice of Ehud Olmert as the new Prime Minister could escalate the conflict.

Under Mr Olmert’s disengagement strategy, Israel would unilaterally turn its $2 billion razor-wire and concrete West Bank separation barrier into a political border, withdrawing from small settlements outside it in return for securing its hold on the large Jewish settlements within Palestinian territories.

The EU, a member of the so-called international Quartet seeking to resurrect hopes of peace, is now facing tough questions over how to continue its financial support to the Palestinians.

Tony Blair has said that Britain will cut its £156 million aid to the PA if Hamas refuses to acknowledge Israel’s right to exist. The Prime Minister has acknowledged that this could prompt Hamas to turn to Iran for support, but said that he had little choice.

"What we cannot do is end up funding the government when the government is inimical to the whole basis on which we want to settle the Middle East problem," he said.

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