Diskin told the cabinet meeting that "this week about $20 million were paid in salaries by the Palestinian Authority, some of the sum finances by the Palestinian president's office and the Finance Ministry. These were not funds transferred by Israel.
"In spite of this payment, the Palestinian government is finding it difficult to meet its obligations to its workers. The government expects funds to come in from the Gulf states and Saudi Arabia, and (Palestinian President Mahmoud) Abbas is exerting efforts to get the Americans to help him," Diskin said.
The Shin Bet chief also addressed Palestinian Prime Minister Ismail Haniyeh's speech during the new government's swearing-in ceremony Saturday.
"Haniyeh said that the government was committed to diplomatic agreements signed. He did not refer to the Quartet principles. The honoring of the agreements will be subject to maintaining the Palestinian people's main interests. This gives Abbas freedom of operation as far as (Haniyeh) is concerned," he said.
'Infighting could affect new government'
Diskin also referred to the Hamas-Fatah government's basic principles.
"Haniyeh spoke about aspiring to establish a Palestinian state in the 1967 border, with Jerusalem as its capital. He stressed the right of return based on UN Resolution 194. On the security level, the Palestinian prime minister says that resistance, in all its forms, is legitimate. He talks about the Palestinian government's effort to stabilize the truce and expand it, in return for a halt of the occupation by Israel."
The Shin Bet chief also referred to the Arab states' stance regarding the Palestinian unity government.
"The Arab countries welcome the agreement and demand that the new Palestinian government is recognized. They call for the economic siege to be lifted. I view the Arab League summit in Riyadh as important. I assume that it will strengthen the Mecca agreement. I believe they will also refer to the Arab peace initiative from February 2002," he said.
Referring to the clashes between Hamas and Fatah, Diskin said, "I believe the tensions between Fatah and Hamas are still high. The clashes, which I call anarchy clashes, are still going on. Last week's incidents, the murder and kidnappings, prove that there is still a lot of tension in the street. This tension could affect what is happening in the government."
Prime Minister Ehud Olmert addressed Palestinian President Abbas' actions.
"If Abbas would take other actions (regarding the release of Gilad Shalit and the war on terro), we would have more room for a dialogue with him. But I do not suggest severing ties with him. We must continue talking with him, particularly about improving the Palestinian quality of life.
"On the other hand, we must not be vague. We cannot have ties with a government that justifies resistance or, in other words, terror. This is unthinkable," he said.
'EU to judge PA gov't according to its acts'
Foreign Minister Tzipi Livni spoke with US Secretary of State Condoleezza Rice and foreign ministers of four European countries over the weekend.
Livni said that the EU countries were seeking to examine whether the new Palestinian government would meet the Quartet conditions.
"Europe is saying 'we want to judge them according to their acts.' This in fact means giving them time, which let them see if there is terror or there isn't terror, will Gilad Shalit be release. The European perspective has not changed, and they are continuing to examine the Palestinians," she said.
"The question is whether Europe plans to judge the Palestinian government as one organization," the foreign minister continued. "In some European countries Hamas is defined as a terror group, and as a result the movement's ministers have not met officials of those countries.
"I believe Abu Mazen (Abbas) will seek a differentiation in Europe. Those who will not talk with Hamas minister might be ready to talk to Fatah ministers."
Asked whether European countries will pressure Israel to negotiate with the Palestinian unity government, Livni said, "I believe Europe does not expect Israel to talk to the Palestinian government, but only to Abbas. I believe Israel should maintain the Quartet conditions."