Other recommendations, formulated following a meeting attended by senior security officials, include the freezing of all projects (such as the setting up of a Gaza seaport and airport) and preparations to turn Gaza's Erez and Karni crossings into international border crossings, thus ending the practice of collecting taxes on behalf of the PA.
Defense Minister Shaul Mofaz also ordered the establishment of a special team that would recommend future moves on a weekly basis.
The defense minister said the swearing in of the new Palestinian parliament on Saturday will mark the beginning of Israeli sanctions, adding that "a Hamas authority constitutes a danger to the State of Israel."
The discussion was also attended by IDF Chief of Staff Dan Halutz, Shin Bet Director Yuval Diskin, Mossad Director Meir Dagan and IDF Intelligence Chief Amos Yadlin, among others.
'honey trap'
During the discussion, defense establishment officials said that the fact that at this stage Hamas is trying to present a false impression of calming the area down is not more than a "honey trap" aimed at putting the public opinion to sleep and creating disputes among the international community.
Hamas is currently continuing to build its power in order to carry out violent acts against Israeli citizens, officials said.
Mofaz said that Israel must continue to insist on its demand that Hamas accepts its conditions, including disarming the organization, renouncing terror, recognizing the State of Israel, annulling the convention calling for Israel's destruction and accepting all past agreements.
"The fact that Hamas is unwilling to withstand these demands should bother the entire world, and only testifies to the organization's real intentions," Mofaz said.
Israel has so far adopted a policy of distinguishing between terrorists and Palestinian civilians who do not take part in terror activities.
The working premise was that Palestinian welfare should be enabled (by providing working permits inside Israel and opening crossings and roadblocks) out of a desire to let Palestinians live their lives in dignity and prevent frustration, which may lead them to join the terrorist activity against Israel.