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Talks continue over Hamas PM pick

Palestinian Authority agrees to return $50 million in U.S. aid

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JERUSALEM (CNN) -- As Hamas members prepare to be sworn in to the Palestinian Legislative Council on Saturday, it is unclear whom they will select as prime minister for the Palestinian government, the group's leader in Gaza City said.

"We are still in the consultation process with all the national, Islamic and independent parties from our Palestinian brothers in order to reach the best decision for this government that will take full responsibility politically and internally for the Palestinian people," Ismail Haniya said.

Hamas remains undecided because leaders do not want to make a rash decision, Haniya said Friday.

Haniya, the top candidate on the Hamas list, is considered a relative moderate.

Hamas' recent victory in the Palestinian elections has strained the Middle East peace process. Though Hamas operates a successful network of social and charitable organizations for Palestinians, the group has refused to renounce violence and recognize Israel's right to exist.

The United States, the European Union and Israel all consider Hamas a terrorist organization and have insisted the group must do these two things.

On Friday, the Palestinian Authority agreed to return $50 million in U.S. aid that Washington fears could be used by the Hamas-led government, State Department spokesman Sean McCormack said.

The money is being returned "in the interest of seeing that these funds not potentially make their way into the coffers of a future Palestinian government that might not recognize the right of Israel to exist," McCormack said.

The money was doled out last year for infrastructure projects in Gaza, a move intended to spur the economy in the area after the Israeli withdrawal, McCormack said. Most of the money hasn't been spent and should be returned promptly, he added.

McCormack also said the United States is interested in helping "the most vulnerable among the Palestinian population" through the United Nations or other organizations.

Israel is also deciding how to react to the Palestinian election results.

Acting Prime Minister Ehud Olmert was briefed Friday on proposed sanctions that Israel could enact once the Palestinian parliament is sworn in.

Barring thousands of Palestinian workers, sealing off Gaza and halting any Gaza development projects involving Israel are among the proposals.

Whether they will be implemented is expected to be decided Sunday at Israel's weekly Cabinet meeting.

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