WASHINGTON, Dec 21 (Reuters) - President George W. Bush on Thursday signed into law legislation restricting aid to the Hamas-led Palestinian Authority until it recognizes Israel's right to exist, makes financial reforms and takes other steps. The United States, the European Union and others regard Hamas as a terrorist group and have already cut off direct aid to the government. Hamas rose to power in parliament after defeating the Fatah party in January. The ban has crushed the government's ability to function and the Palestinian economy. The United States and others have demanded Hamas agree to past Israeli-Palestinian accords, renounce violence and recognize Israel before ending the boycott. "This legislation reflects our continued concern over the failure of the current government to renounce violence and terror, recognize Israel and respect its previous agreements and obligations," a White House official said. The new law Bush signed on Thursday does permit the continued flow of humanitarian aid for Palestinians and groups not linked to Hamas, like Palestinian President Mahmoud Abbas and his Fatah party. Abbas last week called for early presidential and parliamentary elections to try to break the deadlock between factions of the government. U.S. Secretary of State Condoleezza Rice in an interview with Reuters last week said the administration would seek more money from Congress to strengthen Abbas' security forces to ensure he wins any power battle with Hamas. "We will continue to work with moderate Palestinians as we advance toward our shared goal of two democratic states, Israel and Palestine, living side by side in peace and security," the official said, declining further identification. Bush has been under pressure from Congress and abroad to revive the long-stalled Arab-Israeli peace process.
