Prime Minister Ehud Olmert on Sunday ruled out peace talks with the Palestinians, saying contacts will be limited to humanitarian issues until the new coalition government explicitly renounces violence and recognizes Israel's right to exist.

Olmert made the comments a day after the rival Hamas and Fatah movements installed their new unity government in hopes of persuading the international community to end its isolation of the Palestinian Authority and lift a year of bruising economic sanctions.

Israeli officials are concerned the tough international stance against the Palestinians could crumble in the face of the new Palestinian government. Norway immediately recognized the new coalition on Saturday and announced it would lift sanctions. Britain and the U.N. also signaled flexibility, while the U.S. reacted coolly.

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While the coalition's platform is more moderate than that of the previous Hamas-led government, Olmert said it fell short of international demands to renounce violence, recognize Israel and accept past peace deals. He also noted its affirmation of the right to "resistance."

"We can't maintain contact with the government or its ministers when you consider that this is a government that does not accept the conditions of the international community and sees terror as a legitimate goal," Olmert told his Cabinet.

Olmert said he would maintain contact with the moderate Palestinian president, Mahmoud Abbas, who was separately elected and is not a member of the coalition government. But Olmert said the discussions would be limited to "quality of life" issues, such as improving living conditions for Palestinians.

The Cabinet overwhelmingly endorsed Olmert's position 19-2, Israeli radio stations reported.

With direct peace talks with the Palestinians apparently off the table, some Israeli officials have begun urging wider negotiations with the Arab world.

Cabinet minister Meir Sheetrit called for Israel to begin negotiations based on a 2002 Saudi plan offering peace between Israel and Arab countries. He urged Olmert to travel to an upcoming Arab summit where the plan is expected to be revived.

"I recommend that the prime minister go all the way with the move," Sheetrit said ahead of Sunday's Cabinet meeting. Olmert has said he would "seriously" consider the Saudi plan, despite Israeli misgivings.

The new Palestinian foreign minister, Ziad Abu Amr, urged Israel to cooperate with the new government, saying there was a new opportunity to establish cooperative ties. Speaking to Israel Radio, he dismissed the calls for formal recognition of Israel as "semantics."

The new Palestinian administration replaced a year-old government led by Hamas, the violently anti-Israel Islamic militant group that has killed dozens of Israelis in suicide bombings.

Hamas' rise to power last year provoked Israel, the West and Russia to impose severe funding restrictions last year in a bid to pressure the militants to recognize the Jewish state, disarm and accept past peace accords. Israel also has withheld hundreds of millions of dollars in taxes it collects for the Palestinians.

Palestinian lawmakers voted overwhelmingly Saturday -- 83 to 3 -- to approve the government, then leapt to their feet in a standing ovation after the result was announced. Abbas swore in the new 25-member Cabinet shortly after the parliament session.

The Hamas-Fatah alliance, however, is in danger of crumbling quickly over ideological differences, and long-standing enmities between the two factions and their legions of gunmen.

Mixed messages quickly emerged from speeches made to parliament. But, in sum, they appeared to show a softening of Hamas' stance toward Israel.

The new Palestinian alliance appears to implicitly recognize Israel by calling for a Palestinian state on lands the Israelis captured in 1967, in contrast with Hamas' past calls to eliminate Israel altogether.

It also pledges to "respect" previous agreements with Israel and authorizes Abbas to conduct future peace talks. Any future deal would be submitted to a national referendum, suggesting Hamas would not hold veto power.

Abbas focused on conciliatory language, asserting that the Palestinian people "reject violence in all its forms" and seek a comprehensive "peace of freedom and equality" that would be based on negotiations.

Presenting the government's program to parliament, Prime Minister Ismail Haniyeh of Hamas said the alliance would work "first and foremost to establish an independent Palestinian state," with disputed Jerusalem as its capital, on lands Israel occupied in the 1967 Mideast War.

He said the Palestinians maintained the right to resist occupation, but would also seek to widen a truce with Israel, now limited to the Gaza Strip.

Haniyeh was scheduled to hold his first Cabinet meeting later Sunday.

The international community's response will be crucial for the future of the new Palestinian government.

Finance Minister Salam Fayyad warned Saturday that the new government would not be able to function for long unless the boycott is lifted and financial aid is increased.

"We do face a very serious and crippling financial crisis," he said. "Without the help of the international community, it is not going to be possible for us to sustain our operations."

The governing alliance was formed after months of stop-and-go negotiations broken up by bursts of deadly factional fighting that claimed more than 140 lives.

Abbas has brushed aside international misgivings about Fatah joining forces with Hamas, saying it was the only way to avert a civil war in the West Bank and Gaza.

Complete coverage is available in FOXNews.com's Mideast Center.