The 25-nation bloc, whose foreign ministers will discuss the standoff in Luxembourg, insists it cannot fund the militant group until it renounces violence, recognizes Israel, and abides by past agreements with Palestinians.

The EU -- the biggest donor of aid to the Palestinians -- announced Friday the suspension of direct aid by its executive Commission to the Palestinian Authority, after a Hamas-led government took office last month.

The EU move was followed within hours by a similar announcement by the US State Department, in a clearly coordinated effort to increase pressure on Hamas after its shock January election win.

On Monday EU ministers will discuss the issue at regular talks in Luxembourg, and diplomats say they will be keen to present a united front behind the EU decision.

"The temporary suspension of direct aid to the Palestinian government is ... a very clear signal," said one British official, adding that the "message from ministers will be an endorsement" of the EU commission's decision.

EU attempts to limit impact of suspension

The EU gives about 500 million euros ($600 million) a year to the Palestinian Authority, about half of it collectively through Brussels, and the rest from individual EU governments.

The money goes through a web of channels for a wide variety of purposes, from refugee aid to pure budgetary support, and working out exactly how to prevent any cash getting into Hamas-controlled hands is a complex task.

The EU is all too aware of the potential impact on the already battered local economy, and has vowed to do everything possible to limit the impact on ordinary Palestinians, such as funneling more money through aid agencies.

But one source said that the suspension decision could cut over 30 million euros, while others say that nearly half of EU aid is at risk.

Palestinian premier Ismail Haniya lashed out at the EU and US moves Saturday, saying: "The decision of the West, the United States and the Israeli occupation are unjust. They aim at blackmailing us."

Europeans reject claims of blackmail

But the EU is clearly in no mood to appease the leadership of an organization which remains on its blacklist of terrorist organizations.

"They shouldn't claim blackmail. They don't only live on international aid. And we have been clear about our principles from the start, from before the elections. They haven't been taken by surprise," said a French source.

He noted that the EU gave 120 million euros to the caretaker Palestinian government shortly before the Hamas-led cabinet took office.

"We encouraged them by giving them 120 million just before the government was nominated. We knew that part of the aid would still be in the pipeline" when the new government took office, he said.

Belarus sanctions also on the table at EU meeting

While the Palestinian question will dominate Monday's EU talks, other issues on their plate include the cloudy situation in Ukraine after recent ballots, and the re-election of authoritarian Belarus leader Alexander Lukashenko.

The foreign ministers are widely expected to increase pressure on Minsk by lengthening a list of people banned from traveling to the EU, including Lukashenko himself.

But they will likely stop short of taking decisions to freeze assets linked to the ex-Soviet country's regime, although one official said: "We hope that there will be agreement on that before too long."