The grim existence of many Palestinians might be about to become even bleaker. With many West Bank and Gaza Strip residents already struggling amid grinding poverty, they now face the prospect of having western aid cut in response to the  resounding victory  handed to Hamas in parliamentary elections on Wednesday.

Several politicians from the European Union -- the largest donor to the Palestinians -- have called for an end to Europe's financial support should Hamas take part in a government while refusing to renounce violence.

The parliamentary foreign policy spokesman for Germany's ruling Christian Democrats, Eckart von Klaeden, said international aid to the Palestinians would only be possible if Hamas recognized Israel's right to exist, which the group -- designated as terrorist by both the United States and the European Union -- has so far refused from doing. "Hamas in now forced to play a constructive role," von Klaeden told SPIEGEL ONLINE.

It is not likely that international economic implications were on the minds of those Palestinians who backed Hamas at the ballot box on Wednesday. Indeed, many Middle East observers have said the poll outcome is more likely a result of anger over the rampant corruption of the ruling Fatah faction than a call for a greater radicalization of Palestinian politics. However, the upset Hamas win could still have potentially drastic repercussions for the estimated $1 billion in annual foreign aid that keeps the Palestinian territories afloat.

Funding Hamas?

With Hamas still very much committed  to the destruction of Israel, western donors could find it impossible to continue writing checks to Palestinian leaders. The European Commission sent €280 million to the Palestinians in 2005. The bulk of that was via World Bank funds supporting humanitarian aid. But €70 million was slated for the Palestinian Authority (PA) government, which might soon be controlled by Hamas.

Emma Udwin, the European Commission's foreign affairs spokeswoman, said much of the aid earmarked for the Palestinian Authority was not transferred last year since certain benchmarks -- for example goals on good governance -- for the international funds controlling the aid had not been met. Donors withheld millions in December after the Palestinians were found to be raising official salaries and adding people to the payroll at an alarming rate. The World Bank froze some $60 million that had been set aside for PA salaries.

Commission officials on Friday said it was still too early to tell if Brussels would decide to end funding for the PA, but they made it clear that Europe had always made a distinction between aid to the Palestinian people and the government of the occupied territories. EU foreign ministers are expected to discuss the matter when they meet on Monday.

"The ball is now in the Palestinians' court. We have said we will work with those committed to peace," Udwin said.

But even keeping humanitarian aid flowing while turning off the tap for the PA -- the biggest employer in the West Bank and Gaza -- would have serious consequences for the Palestinian economy. Being on the government payroll is a crucial source of income for many families. "If you fired all of the Palestinian Authority employees from one day to the next it would be a humanitarian catastrophe," said Dr. Martin Beck from the German Institute for Middle East Studies in Hamburg.

Beck warned against completely cutting aid to the Palestinians, arguing it would only diminish western say in the region and possibly strengthen the hand of radical Islamic elements. "If you cut off the aid because of Hamas you will lose any influence you might have had. And the Arab world or Iran would likely enthusiastically jump in to fill the gap," Beck said.

Israel mulls withholding taxes

But even with the possibility of help from Muslim hard-liners in Tehran, Hamas might quickly realize that following a more moderate course would be the best way to ensure the Palestinian people avoid financial ruin. Speaking at the World Economic Forum in Davos, Switzerland on Friday, Israeli Finance Ministry official Joseph Bachar said Jerusalem could decide to withhold tax revenue collected on behalf of the Palestinians starting next week.