Brussels, June 16 (DPA) International donors have agreed to set up a special aid fund to channel money to the Palestinian people, bypassing the Hamas-led government, French diplomats said.

The diplomats, speaking at a European Union (EU) summit in Brussels Thursday, said that the United States and Russia had given their go-ahead to the financial facility aimed at easing the worsening financial crisis in Gaza and the West Bank.

The EU has been trying for several weeks to win international approval of the "temporary international mechanism" fund, but the US and the World Bank had until now queried certain key elements of the European proposals.

In a statement to be issued on Friday, EU leaders are expected to insist that the new fund will focus "on essential supplies and running costs for social services and health, supply of utilities including fuel and social allowances".

They will also express hopes that other donors including Arab states will contribute to the fund.

The US, Israel and the World Bank have questioned EU suggestions that money should be made available for the education sector and are particularly determined to prevent Palestinian salaries being paid by foreign donors. They argue this could be seen as supporting Hamas-appointed officials.

Europeans have countered, however, that they want to pay "allowances" - not salaries - to people working in the key health and education sectors.

The EU statement is also expected to call again on Hamas to renounce violence, recognise Israel and abide by past treaties - three key conditions for a resumption of European aid to the Palestinian Authority.

EU aid to the Palestinian government was cut off after Hamas won the Jan 25 legislative elections. The EU, like the US, blacklisted Hamas as a terrorist organisation.

--DPA