The European Commission proposed a three-month extension of a special aid deal for the Palestinians that bypasses the Hamas-led government, Monday.
Refusal of the Islamic group to recognize Israel has caused international aid to the Palestinian Authority to dry up, creating an acute financial crisis.
A temporary World Bank-supervised alternative that bypasses the Hamas government expires at year's end and "it is highly important" it is extended by another three months, said EU External Relations Commissioner Benita Ferrero-Waldner.
The funds have also provided income support payments to about 1 million Palestinians left destitute by their government's financial crisis, including thousands of public service employees who have gone unpaid.
The EU is the Palestinians' largest donor. Israel fears Europeans will go soft on sanctions in view of the hardship faced by many Palestinians. The EU has called on Israel to restore to the Palestinian government payments of import duties on goods that are headed for the West Bank and Gaza.