Palestinian Authority Prime Minster Salam Fayyad on Sunday urged foreign powers to intervene after Israel froze the transfer of tens of millions of dollars in Palestinian tax money following the formation of a Hamas-Fatah unity government.

"Threats ... will not deter us from concluding our reconciliation process. It is our policy and we must work harder to end our divisions as soon as possible," added Fayyad.

The two long-warring Palestinian factions signed an Egypt-brokered reconciliation agreement last week, after four years of bitter infighting which divided the Hamas-ruled Gaza Strip and Fatah-dominated West Bank politically as well as geographically.

Israel objects to the inclusion of Hamas in a unity government, as the Islamist organization will not recognize Israel or renounce violence in its bid for Palestinian statehood.

The PA has asked the foreign powers to stop Israel from blocking the transfers, which make up 70 percent of its revenues. Senior Palestinian official Saeb Erekat said earlier Sunday that Israel, by its action, had "started a war."

Finance Minister Yuval Steinitz said he had suspended a routine handover of 300 million shekels ($88 million) in customs and other levies that Israel collects on behalf of the Palestinians under interim peace deals.

In an interview on Army Radio, Steinitz said Israel feared the money would go to fund Hamas, whose charter calls for the destruction of the Jewish state.

Israel had threatened sanctions last week in response to Abbas's surprise announcement of the unity deal with Hamas that envisages the formation of an interim government and elections later this year.

Fayyad said the PA was "in contact with all international influential forces and parties to stop Israel from taking these measures," the official Palestinian WAFA news agency reported.

The PA is also heavily dependent on aid from donors including the United States, which has said its future assistance will depend on the shape of a new Palestinian government, expected to be formed under the unity agreement.