Ramallah:German Chancellor Angela Merkel has hinted on the continuation of sanctions against Palestine in wake of unity government's refusal to accept conditions raised by the Middle East Quartet for the peace process.

Speaking at a joint press conference with Palestinian President Mahmoud Abbas, Merkel Sunday urged the new Palestinian coalition government to ensure coalition government accepts the Quartet's criteria.

"Only those who renounce violence, accept Israel's right to exist and accept previous agreements, can be a partner in further (peace) efforts," she said.

"The EU has decided not to deal with the government," Merkel said.

With the Palestinian government refusing to meet the Quartet's conditions, international sanctions that prevent millions of dollars from flowing through the Palestinian Cabinet have remained in place.

The Quartet of international mediators includes the EU, Russia, the United Nations and the US.

Abbas said the Palestinian National Authority (PNA) was committed to the Quartet's demands, looking to expand a ceasefire with Israel and release captive soldiers.

He also urged Israel to stop its unilateral measures, including settlement expansions and the construction of the West Bank barrier. He stressed that Israel must release Palestinian tax revenues.

"I call on the Israeli government to take constructive steps to answer the peace initiative put forward by Arab countries," Abbas said.

Merkel revealed that an economic delegation would visit the Palestinian territories soon to look for investment opportunities and rebuild the collapsing Palestinian economy.

Merkel's visit to the Palestinian territories was part of her Middle East tour. She arrived in Jerusalem Saturday and held talks with Israeli Prime Minister Ehud Olmert after a stop in Jordan, where she met King Abdullah II.