Israel's defense minister advised the incoming Palestinian prime minister Tuesday to fear for his life if Hamas militants start attacking Israel again.

Meanwhile, acting Prime Minister Ehud Olmert vowed that his Kadima Party would shave billions off settlement spending — the first time he has said explicitly he would scale back funding for Israel's 40-year-old settlement enterprise, which has cost tens of billions of dollars.

Defense Minister Shaul Mofaz's warning to Hamas, recently elected to rule the Palestinian Authority, was the first to identify Hamas' prime minister-designate, Ismail Haniyeh, as a potential target for an Israeli pinpoint attack.

"No one is immune," Mofaz told Army Radio, a day after an Israeli airstrike on an ice cream truck killed two Islamic Jihad militants and three bystanders in Gaza City. Two of those killed were aged 8 and 14.

Olmert, in a speech in Tel Aviv, said "billions" in settlement spending would be diverted to Jerusalem and to theNegev Desert and Galilee, underdeveloped areas in southern and northern Israel.

"It's no secret that we won't invest in coming years the same sums we once invested in construction and infrastructure development in areas over the Green Line," Olmert said, referring to Israel's frontier before the 1967 Mideast War.

Olmert took over from Ariel Sharon after he suffered a devastating stroke Jan. 4. Olmert spoke just days after his main security adviser, Avi Dichter, said Kadima plans more unilateral withdrawals in the West Bank and hopes to draw its final border within four years.

Polls show Kadima significantly outstripping rivals in Israel's March 28 elections.

Kadima, formed by Sharon in November to push ahead territorial pullbacks, has been slipping in the polls, and the recent policy disclosures were seen as an attempt to shore up support. Reducing Israel's presence in the West Bank after its summer pullout from the Gaza Strip is the key plank in Kadima's platform, and the party's main appeal to voters.

Settler leaders said Israel should invest more money in the settlements, not less.

"For the state of Israel to survive and exist, it has to deepen its presence and invest more in the settlements," said Noam Arnon, a spokesman for the small Jewish community in the West Bank city of Hebron.

Palestinian negotiator Saeb Erekat urged Israel to resume negotiations on a final peace deal immediately after the Israeli election.

"If they withdraw from the West Bank, and if we have the two-state solution, we can devote so many of the resources that now go to war and conflict to reconciliation and peace," Erekat said.

Negotiations broke down years ago and did not receive the hoped-for momentum from the Gaza withdrawal.

Prospects for renewing talks grew even dimmer after Hamas militants sworn to Israel's destruction won January parliamentary elections, reducing the maneuvering power of Palestinian Authority President Mahmoud Abbas, who was elected separately last year and favors a negotiated accord.

Hamas, which is in the process of forming a Cabinet, has rejected international calls to renounce its violent, anti-Israel ideology, but has maintained a year-old moratorium on suicide bombings.

On Tuesday, Mofaz warned that Hamas leaders, including Haniyeh, could be targets of pinpointed Israeli killings if the bombings resume.

Israel's policy of targeted killings has proven effective, and will continue, Mofaz said.

"There is no question about its efficacy," he said. "Look what happened to Hamas in the years it conducted an untrammeled suicide bombing war against us. When we started the targeted killings, the situation changed," he said, referring to Hamas' suspension of attacks.

Dozens of militants have died in targeted Israeli airstrikes, including Hamas founder Sheikh Ahmed Yassin.

Asked if Haniyeh would be a target if Hamas were to resume attacks, Mofaz replied: "If Hamas, a terror organization that doesn't recognize agreements with us and isn't willing to renounce violence, presents us with the challenge of having to confront a terror organization, then no one there will be immune. Not just Ismail Haniyeh. No one will be immune."

Haniyeh brushed aside Mofaz's warnings and accused Israel of trying to disrupt the formation of a Hamas-led government. "The continued escalation aims to shed more Palestinian blood, confuse the situation and hamper ... the formation of the Palestinian government," he told The Associated Press at the Palestinian parliament.

In Israel, air force chief Maj. Gen. Eliezer Shakedi said the number of Palestinian civilians killed in Israeli airstrikes fell in 2005 to one for every 28 militants slain, the military said. A year earlier, one civilian died for every 12 militants killed, Shakedi said.

Hamas headed into a domestic confrontation Monday by voting to strip Abbas of powers his then-ruling Fatah Party granted him in its last session.

Fatah delegates walked out of parliament in protest, charging that Hamas was twisting the rules. On Tuesday, they boycotted the parliamentary session, and filed suit in the Palestinian Supreme Court to overturn Hamas' action.

The conflict between the two parties has been simmering since Hamas swept Fatah out of office in January.