Israel promptly announced it wouldn't deal with the coalition, because governing partners Hamas and Fatah stopped short of explicitly recognizing the Jewish state or renouncing violence, as the international community has demanded.
But the new alliance, which replaced the militantly anti-Israel government led by the Islamic Hamas, appeared to implicitly recognize Israel by calling for a Palestinian state on lands the Israelis captured in 1967. Norway immediately recognized the new coalition and announced it would lift sanctions. Britain and the U.N. signaled flexibility - suggesting money could start flowing again if the coalition keeps anti- Israel activities in check.
The Hamas-Fatah merger, however, is in danger of crumbling quickly over ideological differences, and long-standing enmities between the two factions and their legions of gunmen.
Palestinian lawmakers voted overwhelmingly - 83 to 3 - to approve the government, then leapt to their feet in a standing ovation after the result was announced. Forty-one of the legislature's 132 members, most of them members of Hamas, are held in Israeli jails and weren't able to vote. Palestinian President Mahmoud Abbas of Fatah swore in the new 25-member Cabinet shortly after the parliament session.
The rise to power of Hamas, a group that has killed dozens of Israelis in suicide bombings, 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.
Finance Minister Salam Fayyad warned that the new government would not be able to function for long unless the international community lifted its boycott and increased assistance.
"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."
Mixed messages emerged on Saturday from the political platform the new government announced, and from the speeches leaders of the governing factions made to parliament. But, in sum, they reflected a softening of Hamas' stance toward Israel.
Presenting the government's program to parliament, Prime Minister Ismail Haniyeh of Hamas said the governing 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.
Abbas, a moderate, 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.
Abbas' words underscored the ideological gaps that remain between him and Hamas.
While the alliance didn't meet international conditions for acceptance, it pledged to "respect" previous peace deals between Israel and the Palestine Liberation Organization. It also called for peace talks to be conducted by Abbas, and for any future deal to be submitted to a national referendum, suggesting Hamas would not enjoy veto power.
Egypt, a leading regional mediator, urged the international community to stop isolating the Palestinian government. Its foreign minister, Ahmed Aboul Gheit, called the new coalition a "precious opportunity to resume the peace process."
Israel saw things differently. Government spokeswoman Miri Eisin said Israel would deal with Abbas, but not with the new government unless it recognizes the Jewish state.
"With all the desire we all have to assist the Palestinian people, this new government does not stand for any of the international principles that the international community itself defined," Eisin said.
Foreign Ministry spokesman Mark Regev said Israel called upon the international community "to stand by it own principles and not to deal with a government that refuses to recognize the right of Israel to exist."
In several quarters, the reaction was more positive. Norwegian Foreign Minister Jonas Gahr Stoere announced that Oslo would re-establish relations with the new Palestinian government, saying the coalition was "taking important steps towards complying with international demands."
The U.N.'s Mideast envoy, Alvaro de Soto, and the British Foreign Office both called the alliance a "step in the right direction" and said they would watch to see how the new government would implement its political program. "I welcome President Abbas' continued efforts at intra-Palestinian reconciliation, which have led to agreement on the forming of a national unity government," British Foreign Secretary Margaret Beckett said: "We will judge the government by its platform and actions and respond accordingly." Even before the coalition was approved, Russia praised it for taking international demands "into account." The U.S., traditionally a major donor, has been cool to the coalition plan. "It remains our view that any Palestinian government must renounce violence, recognize Israel and respect previous agreements and obligations between the parties," State Department press officer Nancy Beck said Saturday. "These are foundation principles upon which any Palestinian state must be based." In Syria, a leading member of Hamas' exiled leadership, Moussa Abu Marzouk, demanded that the so-called Quartet of Mideast negotiators - the U.S., U.N., EU and Russia - end aid restrictions. 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. The long-standing enmity caused ordinary Palestinians to question how long their new government would last. "I think this government will last for six months at the most because there are extremists on both sides," said Mohammed Shohar, 43, an engineer who works as a technician at Ittihad Hospital in the West Bank town of Nablus. "I think this government will cause a lot of problems in parliament." Nazek Sweiseh, a physical education student at An Najah University in Nablus, was no more upbeat. "I am not very happy about this," Sweiseh said. "I feel they are all liars, they conned us for a whole year, killing each other." ----- AP reporters Ibrahim Barzak, Sarah El Deeb, Mohammed Daraghmeh and Dalia Nammari contributed to this report from Gaza City and from Ramallah. AP-CS-03-17-07 1653EDT