Prime Minister Binyamin Netanyahu warned Europe on Tuesday against making the "mistake" of granting legitimacy to the newly united Fatah-Hamas government, as China said it welcomed the move.

Netanyahu made his latest plea to the international community as it was expected to follow Washington's lead and back the Palestinian unity government, which Israel sees as being supported by terrorism.

Netanyahu appealed to French President Francois Hollande in a phone call, saying the Palestinian unity government that was officially announced on Monday demonstrated "a Palestinian step against peace and in favor of terrorism."

As Israel views Hamas as a terrorist organization intent on the destruction of the Jewish state, the premier added that no European country would be prepared to accept a terrorist organization as part of its government and therefore should not acknowledged a Palestinian government backed by Hamas.

After hearing late Monday night that Washington planned to establish ties with the newly sworn-in Fatah-Hamas unity government, Israeli officials charged that the United States had sanctioned terrorism.

Israel had hoped that the US would reject the newly formed interim Palestinian government which was sworn in on Monday at a Ramallah ceremony.

Palestinian Authority Prime Minister Rami Hamdallah called US recognition of a new Palestinian unity government "encouraging" Tuesday, after concluding the first meeting of his new cabinet in the West Bank city of Ramallah.

"We received many positive signals from too many states, too many countries from Arab states, from Muslim states, even the statement that was issued by the State Department yesterday it was very encouraging," Hamdallah said.

Meanwhile, China said on Tuesday that it welcomed the new Palestinian unity government formed after an agreement by the Fatah and Hamas factions.

Palestinian Authority President Mahmoud Abbas swore in a unity government on Monday in a reconciliation deal with Hamas Islamists, who advocate Israel's destruction.

Chinese Foreign Ministry spokesman Hong Lei said internal reconciliation would be conducive to peace talks between the Palestinian Authority and Israel.

"China welcomes the Palestinians forming a unity government. Realizing internal reconciliation is conducive to Palestinian internal solidarity, and is also conducive to the Palestinians pushing forward peace talks with Israel," Hong told a regular news conference in Beijing.

China has traditionally had close relations with the Palestinians, but in recent years has also had good ties with Israel, especially in the field of defense.

Tovah Lazaroff contributed to this report.

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