"Israel was always in favor of giving money to the Palestinian population but not via the Palestinian (National) Authority," Livni told Israeli Army Radio.

"This decision is only the first step in a process. They must decide how this fund will be set up, how it will operate and who will control it," she said.

On Tuesday, the Middle East Quartet, which includes the United States, Russia, the European Union and the United Unions, agreed to provide assistance to the Palestinian people through a temporary international mechanism for a trial period. The United States and the European Union cut off aid to the PNA after the new Hamas-led government, which was sworn in on March 29, defied their demand to renounce violence, recognize Israel's right to exist and respect existing peace deals.

Some 165,000 Palestinian government employees, whose income supports one-third of Palestinian families, have not been paid for the past two months, and the World Bank warned this week of an impending humanitarian catastrophe.