Israel is putting the economic squeeze on the Palestinians, after the election of the Islamic militant group Hamas last month. Hamas is also under growing pressure from Palestinian moderates to renounce violence.

Shaul Mofaz (file photo)

Israel's defense ministry has recommended barring Palestinian workers in the Gaza Strip from entering Israel and restricting the movement of goods. The measures, which are expected to be imposed next week, would be a severe blow to the Palestinian economy, already battered by five years of conflict.

Israel also plans to cut off $50 million in monthly tax payments to the cash-strapped Palestinian Authority. Israeli government spokesman Mark Regev says the move is part of economic pressure against a Hamas-led Palestinian parliament that will be sworn in on Saturday.

"No one can ask Israel to transfer funds to terrorist organizations like Hamas and have those funds come back to us in the form of suicide bombings," he said.

Hamas described the Israeli measures as collective punishment.

But Hamas is also feeling the squeeze from Palestinian leader Mahmoud Abbas of the defeated and more moderate Fatah party. Concerned about the loss of economic support, Mr. Abbas plans to order Hamas to renounce violence and accept his goal of pursuing a peace agreement with Israel if it wants to take over the government.

Palestinian analyst Wadia Abu Nasser says it is part of an emerging power struggle within the Palestinian Authority or PA.

"I believe that we will witness in the coming months almost daily struggle between the presidency of the PA, meaning President Mahmoud Abbas, and the Palestinian Cabinet and parliament led by Hamas," he said.

Mr. Abbas believes the only way to achieve Palestinian statehood is through internationally-recognized peace talks with Israel. Hamas believes a state will come about only when Israel is destroyed through jihad, or holy war. And it's going to take some time for the two rival factions to bridge the gaps.