Kol Israel leading news radio said the funds accumulated from taxation on behalf of the Palestinian National Authority had been frozen since the beginning of 2006 in concern that they could have been used by radical Islamists to finance its terrorist activities against Israel.
But after a week of armed clashes between Hamas and moderate Fatah movement, Mahmoud Abbas dissolved the government led by Hamas's Ismail Haniya, and instructed pro-Western Fatah member Salam Fayyad, formerly a finance minister, to form a new emergency Cabinet.
The conflict between rival Palestinian factions left at least 100 people dead in Gaza and ended up with Hamas seizing control over Gaza. The West Bank, a more expansive territory, remains in the hands of Fatah.
Israeli authorities said the breakup between Hamas and Fatah eliminated a major obstacle in funds transfer because it guaranteed that the money would not end up in the hands of the Islamists, allegedly linked to al-Qaeda terrorists.
The funds will be transferred in several tranches to the emergency Cabinet in the West Bank city of Ramallah, the radio said.
Egypt's President invited last week the Palestinian leader and Israeli Prime Minister Ehud Olmert along with the King of Jordan for a summit at the Egyptian resort of Sharm el-Sheikh to discuss ways of resuming the Middle East peace process.
