CAIRO, March 12, 2006 (IslamOnline.net) – International Middle East envoy James Wolfensohn told his staff he would quit over the West's failure to agree on a clear policy to deal with a Hamas-led Palestinian government, a leading US newspaper reported on Sunday, March 12.

"You can't deal with development and trade when it's unclear what funding mechanism will be acceptable to the donors," a member of Wolfensohn's staff told The New York Times.

"Every country has its own ideas, but there's little leadership and nothing will work without an agreed decision that gives a clear political envelope within which to work."

Wolfensohn was appointed the Mideast Quartet envoy to oversee Israel's pullout from the Gaza Strip last August and to help the Palestinians make Gaza a success through investment and job creation.

The Quartet, which groups the US, the EU, Russia and the UN, has threatened to cut off aid to the Palestinians unless Hamas, which swept the legislative elections and is forming the new government, disarms and recognizes Israel.

Hamas has rejected threats of a fund cut-off as blackmail and said it would seek assistance from Arabs and Muslims, both at the grassroots and government levels.

Although Quartet officials have suggested they should continue aid to the Palestinians while bypassing Hamas, there was no consensus on how to do so.

A Palestinian street vendor stands in front of the Israeli separation barrier near the Qalandiya checkpoint. (Reuters).

Wolfensohn, the former head of the World Bank, said he agreed to keep his post until next April upon a request from the Quartet.

"It would be irresponsible to shut down the office three days after the Israeli vote," Wolfensohn told his staff, according to one of them.

The Israeli general elections are scheduled for March 28.

"But I also think it would be irresponsible to keep it open further without a clear quartet decision on policy toward the Palestinian Authority in the current circumstances."

Late February, Wolfensohn warned that the PA risks a financial collapse within two weeks.

He has asked the Quartet to develop a long-term funding plan once a Hamas-led government is in place.

Israel has frozen the monthly transfers of tax revenues it collects on behalf of the Palestinian Authority, worth around $50 million.

An official close to Wolfensohn said he has been frustrated by the Bush administration's inability to ensure that Israel would keep its promises of improved access in and out of Gaza for people and goods.

Israel scrapped an agreement with the Palestinians for a regular bus convoy between Gaza and the West Bank, citing security reasons.

It has also shut down Gaza's main commercial terminal for goods traffic between Israel and Gaza.

A USAID report said that Israel's closure of the Gaza Strip's main commercial crossing has caused steep financial losses and risks an agricultural catastrophe in the impoverished area.

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