Defense Minister Amir Peretz requested on Wednesday that Yusuf Mishleb, the government's coordinator in the Palestinian territories, prepare a detailed plan that would facilitate the transfer of some NIS 50 million in tax funds to the Palestinian Authority. Peretz said he would present the plan to the cabinet on Sunday. The defense minister has thrown his weight behind Foreign Minsiter Tzipi Livni, who earlier Wednesday said that Israel was willing to release tax revenue it has withheld from the Palestinian Authority since February to pay for humanitarian aid. The offer, made to the Quartet following its Tuesday decision to create a fund to pay for humanitarian aid to Palestinians, is an extension of the policy of using the withheld money to pay for electricity and sewage services. Livni said that Israel would consider releasing the tax funds "for direct humanitarian needs, such as medicines, such as health needs." However, she told Channel 10, the money could not go to the Palestinian Authority to pay salaries. Foreign Ministry spokesman Gideon Meir said later the money would only be used to buy "goods and services for medical care that can help the Palestinians." Since February, Israel has placed in escrow approximately $50 million a month in taxes and tariffs it collects on behalf of the PA and said it would not transfer the funds until its Hamas-controlled government recognizes Israel, renounces violence and accepts all signed agreements. MK Yuval Steinitz (Likud) criticized both Israel's and the Quartet's decisions to provide the aid. "If we want to make clear to the Palestinian people and everybody else that nobody can support a terrorist government, then we cannot support the Palestinian Authority by other means," he said. "The Quartet decision was wrong and very damaging, and if we proceed in this direction, the next result will be that we will in fact be supporting a terrorist regime." The mechanism under development by the European Commission to ameliorate the humanitarian situation in the PA territories will likely not funnel money through the office of PA Chairman Mahmoud Abbas as initial reports had suggested, EC officials in Brussels said Wednesday. But against the wishes of Israel and the US, the mechanism may be used to pay salaries of some PA officials, EC external affairs spokeswoman Emma Udwin told The Jerusalem Post. Rather than send money to Abbas as has been proposed, the EC would work on "a mechanism outside of the PA," she said. "We are not in the business of creating parallel structures. Something that mirrored what happens within the Ministry of Finance of the PA, we are not interested in." With a bow from the US to the positions of the EU, UN and Russia, the Quartet on Tuesday expressed support for a new mechanism that would funnel funds directly to the Palestinians, to stabilize the deteriorating conditions in the PA territories. The EC was charged by the Quartet with developing a funding mechanism that would bypass Hamas. Under the format under consideration, Abbas would act as an interlocutor, facilitating the implementation of aid projects while not being responsible for dispersing any money. Udwin allowed for the possibility that the new mechanism would be used to pay the salaries of some PA civil servants. "Clearly something must be done with basic services like health and education," she said. "But we haven't said whether that means salaries or not." The mechanism will be used for three months, after which the Quartet will review its effectiveness, Udwin said. Palestinian Prime Minister Ismail Haniyeh did not comment on the Quartet's decision, instead attacking it for persisting with its demand that Hamas accommodate Israel. "The Quartet brings from time to time conditions to force the government to concede the rights and recognize the legality of the occupation," Haniyeh said early Wednesday. Abbas aide Nabil Abu Rdeneh pronounced the decision satisfactory, and called on the Quartet to "find a mechanism to rapidly provide our people with aid." Hamas's political chief in exile, Khaled Mashaal, while on a visit to Qatar on Wednesday, asked "Hamas supporters throughout the world, as well as Arab states, to send weapons, fighters and money to the Palestinian Authority." Israel reacted with cautious optimism to the proposal, saying it would support any humanitarian funding that cuts out the Hamas-led PA. "We have no interest whatsoever in hardship, and we will do everything that we can to facilitate this direct sort of funding that bypasses the regime," Foreign Ministry spokesman Mark Regev said. However paying salaries is a different story, with both Israeli and American officials saying Wednesday that they could only support such a move under extremely limited circumstances, to a select few PA civil servants and with the money being transferred directly from the international community to the employees. Direct funding of a health clinic and its doctors, an Israeli official said, might be acceptable. But "schools are a problem because Hamas schools will teach kids to hate; they will teach Palestinian kids to become suicide bombers," the official said. If the new mechanism helps pay the salaries of some civil servants, the decision could represent the first backtracking by the international community from its declared policy of not funding a Hamas-led PA. The move by the Quartet comes after numerous reports over the last week highlighting the severe state of the health care system throughout the PA territories, particularly in the Gaza Strip. The World Bank and a host of non-governmental organizations operating in the territories have warned that as long as funding is withheld, poverty, unemployment and food insecurity will rise dramatically as the PA economy experiences a sharp contraction. It was those dire prospects that the Quartet is seeking to address by developing "a temporary international mechanism, limited in duration and scope and fully accountable, that ensures direct delivery of any assistance to the Palestinian people," according to the statement released following its New York meeting. The US has effectively blocked any funding of the PA - even from Arab countries - since the Hamas takeover by threatening to prosecute any bank that transfers funds to the authority under US anti-terror laws. Ahead of the Quartet meeting, the US had expressed opposition to any resumption of funding for the PA, and afterward Secretary of State Condoleezza Rice said, "The Hamas-run Palestinian Authority government bears sole responsibility for the hardships facing the Palestinian people." But in the end, the US agreed to allow the EU to develop the mechanism, with the stipulation that the money not wind up in the hands of Hamas and that it reserves the right to cancel the funding at any time. "We want to emphasize that it must be limited in duration and limited in scope, because we don't want the assumption that responsibility for meeting the needs of the Palestinian people has been transferred from the Palestinian government to the international community," US Embassy spokesman Stewart Tuttle said. It is apparent, though, that the extent to which the US and Europe are willing to hold Hamas to the fire to gain its acquiescence to the three conditions are diverging as the direct consequences for the Palestinian people begin to amplify. Whether those differences will eventually scuttle the agreement on funding by the Quartet will not be known until the details of the mechanism emerge. Besides the tension between the two parties over paying PA salaries, other issues concern who will control the fund, where the contributions will come from and whether additional approval will be needed from Quartet members before the mechanism becomes functional. The EC spokesman in Tel Aviv denied any softening of Europe's position vis- -vis Hamas. "The position was that we would not transfer any money to or through Hamas-controlled ministries," David Kriss said. "That does not appear to have changed." In the meantime, the Quartet is encouraging international donors to begin amassing enough funding to stabilize the humanitarian situation in Gaza. The Quartet statement also called upon Israel to better implement the agreement on movement and access brokered by Rice in November that, among other provisions, calls for a better flow of goods into and out of Gaza. That agreement has been stalled almost since the day it was signed, with Israel claiming security concerns and an attack on the Karni crossing have prevented the smooth operation of the goods terminal. Palestinians say the closures were he result of a political decision taken by Israel and amount to collective punishment. On Wednesday, the Peres Center for Peace released a position paper calling for the immediate and continued opening of Karni, citing severe economic damage suffered in Gaza and lost revenue to Israel businesses caused by the closures. Although the paper acknowledged legitimate security concerns at Karni, it said the long-term benefits of its steady operation outweighed short-term risks. "Movement at the crossing is key to defining the economic relationship between Israelis and Palestinians," the paper said. "Indeed, the solution, or non-solution, of the problem will play a major role in determining the future economic relationship between Israel and the Palestinians, shedding light on the possibility for future cooperation." AP contributed to this report.