However, Israel played down the prospect of peace talks saying the new Palestinian government sworn in last weekend to replace the Hamas-led cabinet needed time to settle in.

"We have taken a decision in principle to release the money," Prime Minister Ehud Olmert's spokeswoman Miri Eisin told AFP.

"We will discuss with the Palestinian president (Mahmud Abbas) tomorrow, and with the Palestinian government in the summit's aftermath, how we release the funds."

Release of the money to the Palestinian leadership in the West Bank is the centrepiece of measures proposed by Olmert to boost Abbas following the Islamist Hamas's seizure of the Gaza Strip.

The withholding of the tax receipts over the past 15 months while Hamas-led governments were in power -- now totalling well over 600 million dollars -- sparked a financial crisis for the Palestinian Authority leaving it largely unable to pay its own staff or contractors.

Abbas and the other Arab participants at Monday's summit in Sharm al-Sheikh, Egypt and Jordan, have been pressing for Israel to be generous in its support for the Palestinian leadership.

But the Israeli premier has faced pressure from within his cabinet to release the money in stages and to insist on the prior establishment of a mechanism to ensure that the funds do not reach militant groups.

Olmert told his ministers that he would also expect undertakings from Abbas at Monday's summit -- their first meeting since April 15, after a planned encounter in early June was cancelled.

"I will present demands at the summit concerning security and the war against terrorism while at the same time stressing that we are ready to cooperate with the new government" sworn in by Abbas after his dismissal of the previous Hamas-led administration, the premier said.

Security cabinet member Shaul Mofaz, a former army chief, said that further measures to boost Abbas should wait until he had proved he was serious about cooperating with Israel.

"We will only be able to envisage the release of prisoners once it is clear that the Palestinian Authority is honouring its commitments and maintaining order in Judaea and Samaria (the occupied West Bank)," the transport minister said.

The cabinet meeting came as Abbas discussed his expectations of Israel with the other participants in Monday's summit.

King Abdullah II of Jordan called for the gathering to set a date for the resumption of Middle East peace talks.

"The king emphasised that the summit must be seized as an opportunity to formulate a clear timeline for a return to negotiations," a palace statement said.

But Olmert's spokeswoman said the emergency cabinet sworn in by Abbas need to be given time to settle in before there could be a resumption of peace talks.

"Let's wait and see the stabilisation of the new Palestinian government. Let's take it one step at a time," Eisin said.

The Hamas masters of Gaza have said they are unfazed by Israel's moves to bolster Abbas's secular Fatah faction at their expense.