U.S. Secretary of State Condoleezza Rice met Thursday with Palestinian President Mahmoud Abbas in the West Bank city of Jericho, and with Israel's Prime Minister Ehud Olmert in Jerusalem. VOA's Jim Teeple reports comments by President Abbas on Thursday have raised new doubts about whether Palestinians will be able to form a new unity government, not led by Hamas.

Secretary Rice says her trip to Israel and the Palestinian territories was to encourage peace talks between Israelis and Palestinians, and that a ceasefire agreed to by both sides in the Gaza Strip should be extended.

In Jerusalem, she and Israeli Prime Minister Ehud Olmert discussed the Gaza ceasefire, a possible prisoner exchange between Israelis and Palestinians and the Iranian nuclear issue.

Earlier in the day, meeting with Palestinian President, Mahmoud Abbas in the West Bank city of Jericho, Secretary Rice called on Israel to ease restrictions on Palestinians in the West Bank, where, she says, they face daily humiliations.

"The daily difficulties and humiliations that are associated with life for the Palestinian people simply must be eased," she said.

Secretary Rice also expressed support for the creation of what she described as a "viable and contiguous" Palestinian state saying no actions should be taken to "prejudge" that goal - a reference to the building of Israeli settlements in the West Bank.

However, her remarks were largely overshadowed by comments made by President Abbas, who in a surprise development, told a Jericho news conference that he believed efforts to form a unity Palestinian government had reached a dead end.

Mr. Abbas says that after six months of talks, his Fatah faction had not reached any agreement with Hamas, and that it was doubtful that a unity government could be formed anytime soon.

Speaking in Cairo, Ismail Haniyeh, the Hamas prime minister said he did not believe the unity government talks were in danger, saying only a few details remained before a new government could be formed.

Palestinian factions have been trying to create a new government in a bid to end the economic boycott of the Palestinian Authority and revive peace talks with Israel.

Donor aid, and customs and tax revenue that Israel turns over the Palestinians have been suspended, because Hamas, which controls the Palestinian government, refuses to recognize Israel. Secretary Rice said Thursday that a new Palestinian government was essential - not only for getting the aid restarted - but also for reviving peace efforts between Palestinians and Israelis.

"Unfortunately because there is not a government with which the international community can deal, it is very difficult to do more [on] the humanitarian side," she says. "We do believe that if there was a government that accepted international standards, it would be possible for the international community to do more, if the international principles were respected."

In her remarks on Thursday, Secretary Rice did not directly address President Abbas' comments regarding the failure to form a unity government - calling them an internal Palestinian matter.