Secretary of State Condoleezza Rice met Tuesday with Palestinian Finance Minister Salam Fayyad, broadening her contacts with members of the new Palestinian unity government in which moderates have joined forces with Hamas militants.

The predominant topic of the session at the State Department was economic distress in Palestinian-occupied areas.

A senior U.S. official said Rice participated for about 30 minutes in a session Fayyad was holding with the State Department's top Mideast official, Assistant Secretary David Welch.

Fayyad disclosed the meeting at a news conference at the Palestine Center a few blocks from the State Department. He said they discussed ways to ease the Palestinians' economic problems, including changes in its banking system.

The aim is to regulate and simplify distribution of contributions from around the world.

"Things are evolving in a positive way," Fayyad said.

The United States and the European Union consider Hamas a terrorist group and have cut off most aid and contact with Palestinian leadership since Hamas won Palestinian legislative elections more than a year ago.

The West and Israel continued contacts with Palestinian President Mahmoud Abbas, a moderate who was elected separately. The task of distinguishing Abbas from Hamas was made more complicated by last month's formation of a coalition government whose terms do not satisfy international demands to recognize Israel, renounce violence and agree to abide by past peace deals. international demands.

Fayyad is a member of the Third Way party but cooperates with Hamas. Like Abbas, Fayyad accepts Israel.

Fayyad has long relationships with U.S. officials, and met last month in the West Bank with Jacob Walles, the U.S. consul in Jerusalem. Fayyad also met recently with Welch while the U.S. diplomat was visiting the region, a senior U.S. official said, speaking on condition of anonymity to describe a previously undisclosed session.

The initial contact with Fayyad came soon after the new government was formed and irritated ally Israel, which had drawn a firmer line against contact with anyone in the new coalition other than Abbas.

Although U.S. officials did not rule out higher-level contacts, Rice chose not to see Fayyad when she visited the West Bank last month. She saw only Abbas and no other members of his unity government.

Praising Rice's diplomatic efforts, Fayyad said, "We are encouraged by efforts Secretary Rice has been making to re-engage the parties."

The United States and Israel have ruled out negotiating with a Palestinian government that includes Hamas, which they consider a terror organization.

Fayyad was in Washington primarily to attend the spring meetings of the World Bank and the International Monetary Fund.

"Poverty is widespread," he said. "Nearly two-thirds of the people in Gaza live below the poverty level."

"There is suffering everywhere," he said. "The time has come for it to be resolved."