Israeli Foreign Minister TzipiLivni said on Wednesday that Israel was willing to free the tax revenues, which it has been withholding for months, on condition that the money go nowhere but for humanitarian causes, local newspaper the Jerusalem Post reported.

Livni told Israeli Channel 10 TV that she made the new offer to the Middle East Quartet peace mediators, who are making diplomatic efforts to prevent an economic meltdown in the West Bank and Gaza Strip.

"Israel will not give this money for salaries but is certainly willing to make additional use of it, above what it has been used for until now, for humanitarian ends," Livni was quoted as saying.

Israel decided to freeze the monthly transfer of about 50-55 million U.S. dollars of tax revenues it collects on behalf of the Palestinians to the Palestinian government since the Islamic Resistance Movement (Hamas) won the Palestinian legislative elections by a landslide in January.

The Quartet of key Mideast peace brokers-- the United States, the European Union, the United Nations and Russia-- decided on Tuesday to provide aid to the Palestinian people through a temporary "international mechanism" with a three-month trial period in order to avert a humanitarian disaster.

Israel welcomed the decision, although opposition critics said that it could undermine economic pressure on the Hamas-led Palestinian government.

The U.S. and the EU have suspended direct aid to the Hamas-led Palestinian government since the Islamic group refuses to renounce violence, recognize Israel's right to exist and abide by previous Palestinian-Israeli agreements.

But the cutoff of crucial aid and the tax transfer halt have led to a deep economic crisis to the Palestinians while the Hamas government has been struggling to pay the salaries to over 160,000 civil servants.