(Updates with Olmert, U.S. State Department quotes) By Wafa Amr RAMALLAH, West Bank, Nov 28 (Reuters) - Palestinian President Mahmoud Abbas has told Jordan that talks on a unity government with Hamas have hit a "dead end" and he will pursue other options, a senior Palestinian official said on Tuesday. The "other options" could include the dismissal of the Hamas-led government and the appointment of a new prime minister, moves that would signify a new hard line against Hamas that could shake up the Palestinian political process. Abbas's statement comes a day after Israeli Prime Minister Ehud Olmert made an appeal for peace with the Palestinians and before talks with U.S. Secretary of State Condoleezza Rice on Thursday, suggesting that it is part a bout of fresh diplomacy. If Abbas were to dismiss the Hamas-led government and form a new one, it could open the way for Western financial sanctions, imposed after Hamas came to power in March, to be lifted, removing a heavy burden restraining the Palestinian economy. At the same time, any move to dismiss Hamas from power, or to call a referendum on whether a new government should be formed, is likely to incite anger among supporters of the Islamist group and may deepen internal violence. Following the reports of Abbas's statement, Hamas acknowledged that talks on a unity government, which have been off-and-on for months, were at a severe impasse, but said it still hoped that a way forward could be found. The senior Palestinian official said Abbas had told Jordanian officials during talks in Amman that: "Talks with Hamas over a unity government have come to a dead end. This is not an option he will pursue," the official said of Abbas. "He is now thinking of other options," having given up hope of reaching an agreement with Hamas, the official said. Abbas has been trying to get Hamas to meet Western demands to recognise Israel and renounce violence. Hamas, which is formally committed to Israel's destruction, has resisted the calls. ROCKETS INTO ISRAEL Olmert, meeting with European ambassadors near Tel Aviv, said he was "a little disappointed" at sporadic rocket fire from Gaza at Israel despite a truce called Sunday after nearly five months of daily clashes. A rocket fired from Gaza struck near the town of Sderot on Tuesday, one of about a dozen launched since Sunday, causing no casualties. Olmert said Israel "will continue to show restraint but at the same time the Palestinians must abide by the agreements so that the ceasefire will effectively take place." Abbas is to meet Rice in the West Bank town of Jericho on Thursday amid growing U.S. pressure on Israel and the Palestinians to show progress on ending decades of conflict. President George W. Bush and Rice are due in neighbouring Jordan on Wednesday for talks with Iraqi and other regional leaders and are widely expected to address the Israeli-Palestinian crisis. State Department spokesman Sean McCormack said in Washington that Rice may also meet with Israelis. "We believe that President Abbas is acting in good faith in taking these steps, and we encourage both sides to continue to abide by the cease-fire," said McCormack, adding that Israel had so far shown "great restraint". Abbas earlier welcomed Olmert's major policy speech on Monday, which expressed willingness to return to peace talks under the U.S.-backed "road map" and to free Palestinian prisoners in exchange for an Israeli soldier held in Gaza. Olmert also said peace talks could not be held before a Palestinian government was set up that replaced the one now headed by Hamas. In a sign of the growing uncertainty about the Hamas-led government's future, Prime Minister Ismail Haniyeh, a senior Hamas figure, left the Gaza Strip on Tuesday for a trip in the region that advisers said could last for more than a month. He is expected to join other senior Hamas figures who have gone abroad to try to raise funds to keep their government functioning in the absence of the direct aid flows that have been stopped by the Western embargo.
