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U.S. says 'disappointed' by Palestinian unity deal

WASHINGTON (Reuters) - The United States said on Wednesday it was let down by a unity pact agreed to between the Gaza-based Islamist group Hamas and President Mahmoud Abbas' Palestine Liberation Organization and added it could make peace efforts difficult.

"The timing was troubling, and we were certainly disappointed in the announcement," State Department spokeswoman Jen Psaki told a regular news briefing.

"This could seriously complicate our efforts - not just our efforts but the efforts of the parties to extend their negotiations."

The leaders of a U.S. House of Representatives appropriations subcommittee that oversees foreign said the Palestinians' agreement with Hamas could jeopardize funds they receive from the U.S. government.

The United States, Israel and the European Union view Hamas as a terrorist organization,

Washington sends about $500 million to the cash-strapped Palestinian Authority each year. Frustrated members of the U.S. Congress, who are generally strong supporters of Israel, said that money could be cut off.

"Not only does this action potentially derail any hope of a peace agreement between Israel and the Palestinians, it puts in jeopardy future U.S. assistance to the Palestinian Authority," Republican U.S. Representative Kay Granger, the subcommittee chairwoman, said in a statement.

Psaki said U.S. officials had expressed their concerns to the Palestinians.

"It's hard to see how Israel can be expected to negotiate with a government that does not believe in its right to exist," she said.

Hamas has battled Israel, which it refuses to recognize, while Abbas' Fatah party has remained in control of the Palestinian Authority in the occupied West Bank and pursued years of fruitless talks with Israel.

Psaki said the longtime U.S. expectations of the Palestinians in the negotiating process had not changed: that they should unambiguously commit to non-violence, recognize the existence of Israel and honor previous agreements.

"What we're going to watch and see here is what happens over the coming hours and days to see what steps are taken by the Palestinians," she said.

The Palestinian move, coming after a series of failed efforts to reconcile with Hamas after seven years of internal bickering, envisions a unity government within five weeks and national elections six months later.

Israel said after the announcement that Abbas had chosen Hamas over peace, and canceled a session of U.S.-brokered talks with the Palestinians that had been scheduled for Wednesday night in Jerusalem.

Psaki said Secretary of State John Kerry had spoken by telephone with Israeli Prime Minister Benjamin Netanyahu about the Palestinian announcement. She said Kerry had not spoken with Abbas, but "our team on the ground has."

Israeli Channel 2 TV said Netanyahu would convene an emergency session of his security Cabinet on Thursday to discuss his response.

The talks, aimed at ending Israel's decades-old conflict with the Palestinians and establishing a Palestinian state in the West Bank and Gaza, are scheduled to end next Tuesday.

(Reporting by David Brunnstrom, Doina Chiacu and Patricia Zengerle; Editing by Sandra Maler, Prudence Crowther and Peter Cooney)

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