The Palestinian prime minister says his government will not bow to foreign pressure to recognise Israel despite funding cuts that are pushing the Palestinian Authority to collapse.
The US and the European Commission suspended direct aid on Friday to Ismail Haniya's new government until Hamas gives up its armed resistance to the occupation and recognises Israel.
Hamas, which came to power in elections in January, maintains that the Palestinians have the right to defend themselves against Israel.
Haniya said on Saturday: "The attempts to strangle the government have one aim. They will not extract political concessions from us that will harm the rights of the Palestinian people."
Haniya was speaking at the opening of a children's art exhibition.
Background
Since taking office last week, relations between Haniya and Mahmoud Abbas, the Palestinian president, have been tense. At issue are Abbas's powers, as well as Israel violence that has prompted vows of revenge by Hamas's armed wing.
Hamas has largely abided by a year-old truce with Israel and kept a lid on its rhetoric in recent months.
In the deadliest Israeli attack in five months, missiles hit a car leaving a militant training base in the southern Gaza Strip on Friday, killing five resistance fighters and the five-year-old son of one of them.
Khaled Abu Hilal, a spokesman for the Hamas-controlled interior Mministry in charge of security matters, said he supported calls by Hamas's armed wing to avenge the air strike.
"Our people have the right to keep the arms of resistance and to respond to the aggression," he said. "We understand the need of our fighters for training bases to rebuild themselves. We will secure that."
Financial worries
Haniya and Abbas failed to resolve a dispute over powers in talks on Friday night over Abbas's decisions this week to assume control of Gaza's border crossings and make a high-level security appointment.
In an interview with The Guardian newspaper in Britain, Abbas said any attempt by Israel to set its borders unilaterally would delay rather than solve a resolution to the conflict.
"After 10 years, our sons will feel it is unfair and they will return back to the struggle," he said.
Despite the aid cuts, the United States said in its announcement in Washington it would boost humanitarian assistance to the Palestinians through UN agencies to avoid widespread economic distress in the West Bank and Gaza Strip.
The cuts have left Haniya's new government scrambling to find ways to pay 140,000 workers employed by the Palestinian Authority who support about a third of the population of 3.8 million in the territories.
In the West Bank, merchants complained of an increase in the number of bounced cheques. Government employees began tightening their belts in the expectation that their salaries would not be paid this month.
Hamas has appealed to Arab states and Iran to fill the shortfall, but has not even been able to find a bank willing to handle its finances.
Israel shells Gaza, one killed
The Israeli army has fired artillery shells at a Palestinian security post in the northern Gaza Strip, killing one person and wounding at least five others.
Palestinian security sources said an artillery shell landed on a small security base east of the northern Gaza town of Beit Hanoun on Sunday.
The victim, according to AFP, was named as Yasser Abu Jarad, a driver who had just dropped off members of a unit manning the base.
It is not clear who the injured were. One report states they were members of the national security force while another states they were civilians.
An Israeli army spokeswoman said she was checking the report.
Increased attacks
Earlier on Sunday, the army said it fired artillery shells at targets in northern Gaza after rocket fire into Israel.
The army has killed 14 Palestinians over the past two days in the deadliest spate of Israeli military attacks in Gaza for five months.
On Saturday, eight Palestinian fighters were killed in two separate air strikes.
The army also killed five resistance fighters and the five-year-old son of one of them in a strike on a car in southern Gaza on Friday.
Israel has ratcheted up military attacks on Gaza since the new Palestinian government led by Hamas took power.
PHOTO CAPTION
A Palestinian youth throws stones at Israeli armoured vehicles during an incursion into Nablus. (AFP)