Israel has agreed to release tens of millions of dollars it withheld from the Palestinians after Hamas ascended to power and is considering easing restrictions on the movement of goods between Israel and the Gaza Strip, officials said Thursday.

Senior members of Hamas and rival party Fatah called for acceptance of a Palestinian state alongside Israel. Such an implied recognition of Israel would mark a major breakthrough for Hamas, which remains committed to the destruction of the Jewish state.

Countrywatch: Israel

It was unclear whether the program would be backed by the Islamic militant group, which has resisted international demands to renounce violence, recognize Israel and accept existing peace agreements.

A Hamas spokesman praised the effort to create a joint platform — which was drafted by senior Hamas and Fatah members who are imprisoned by Israel — but he did not commit to it.

"It could be a good base for a national platform and a national dialogue, but it still needs more discussion," spokesman Mushir al Masri said.

Israel stopped transferring some $55 million in tax and customs revenues it collects monthly on behalf of the Palestinians shortly after Hamas won January parliamentary elections.

The withholding of those funds, coupled with a cutoff in aid from the U.S. and European Union, has left the Palestinians broke and two months behind in paying salaries to government workers who provide for about a third of the people in the West Bank and Gaza.

The potential humanitarian crisis is fueling international alarm.

Palestinians' savings are rapidly dwindling, merchants are forced to buy and sell on credit, gas stations have no fuel and teachers have started striking for back wages. International aid workers and government officials say the Palestinian health care system is on the verge of disaster and sanitation and sewage systems are liable to crash if money is not found soon.

International Mideast negotiators, worried by the reports, agreed at a meeting Tuesday in New York to release humanitarian aid to the Palestinians and to set up a special fund to administer the transfer.

With the West softening its stance, Israel followed suit. On Wednesday, Foreign Minister Tzipi Livni told Channel 10 TV that Israel, too, was willing to release withheld tax and customs revenues "for humanitarian needs such as medicines and health needs."

Livni said Israel would not agree to use the funds to pay salaries of Palestinian government employees. The government hasn't decided how much money would be released, or when, officials said.

Israel's dovish new defense minister, Amir Peretz, meanwhile, was considering easing restrictions on the passage of goods between Israel and Gaza, as international mediators had urged on Tuesday.

Israel has kept the main Karni cargo crossing closed for much of the year. The Israeli military cites security concerns, but Palestinians say they are being penalized for electing Hamas.

Outside U.N. headquarters in Gaza City Thursday, about 40 children protested what they called an economic siege. Several stripped down to their underwear and stood on U.S. and Israeli flags.

"The world should act to end this collective punishment," protest organizer Raouf Barbakh said.

Talks to resolve the Palestinian fuel shortage were under way Thursday with Israeli authorities and the sole provider of fuel to the Palestinians, Israel's Dor Energy, said Mujahid Salame, head of the Palestinian fuel authority.

Filling stations dried up after Dor suspended deliveries to the Palestinians this week because of unpaid bills. Salame told Voice of Palestine radio that he expected an agreement soon.

Dozens of gas station owners and fuel tanker drivers protested outside the parliament building in Gaza City, carrying banners reading, "Fuel is needed to keep our lives moving," and "The world should act to stop this catastrophe."

Peretz also is lobbying for Israel to start talks with Palestinian President Mahmoud Abbas, of the more moderate Fatah party, security officials said.

But Prime Minister Ehud Olmert thinks talks should not resume unless Hamas accepts Israel's demand for recognition and a renunciation of violence.

The political platform that was presented to Abbas calls for the establishment of a Palestinian state "in all the lands occupied in 1967," a reference to the West Bank, Gaza and east Jerusalem.

Abbas said he backed the draft, which also authorizes him to lead peace talks with Israel.

It was not clear whether the senior Hamas figure involved in the document, Abdel Khaleq Natche, had the blessing of the powerful Hamas leadership abroad, including Syria-based Khaled Mashaal, the group's top leader.

Because of Hamas' refusal to bend to Israel's demands, Olmert is expected to proceed unilaterally with his plan to pull tens of thousands of Jewish settlers out of much of the West Bank while fortifying major settlement blocs.

The Yediot Ahronot newspaper reported Thursday that the prime minister is considering carrying out the pullback in phases, because of the large numbers of settlers to be uprooted.

Yediot also said Peretz plans to dismantle all 124 unauthorized settlement outposts, which were put up by settlers in an effort to break up Palestinian areas and block the establishment of a viable Palestinian state.

In violence Thursday, five Palestinians were wounded in the northern Gaza Strip in four separate shooting attacks, a day after Hamas and Fatah leaders agreed to stop the chaos that has plagued Gaza. Hamas and Fatah officials blamed each other for the violence.