It's only by chance that Germany's Angela Merkel is the first western leader to travel to Israel and the West Bank since Hamas -- the radical Muslim terror group and social movement -- swept last Wednesday's Palestinian parliamentary poll. At a less uncertain moment, her visit to the Middle East would have simply been all pro forma protocol. But now Merkel has been thrust into a very delicate situation where both the Israelis -- shortly after Ariel Sharon's departure from the political scene -- and the Palestinians -- still coming to terms with a Hamas-run government  -- are without clear political leadership. That vacuum has increased the potential symbolic significance of Merkel's trip, since western aid donors, the European Union in particular, are trying to figure out how exactly they plan to deal with Hamas -- if at all.

On Sunday, Merkel made clear that unless the Islamists back down from their hard-liner positions, it was "unimaginable" that the Palestinian Authority would continue to be directly funded with EU money. "We'll have to see what the reaction is," she said after meeting interim Israeli Prime Minister Ehud Olmert. "It's important that Hamas understands that we have clear principles."

Merkel set three conditions for European cooperation with Hamas: The group must recognize Israel's right to exist, it must renounce violence, and the extremists must also accept the steps that the peace process has already achieved. That, of course, is a tall order for Hamas -- and it's likely unfillable in the immediate future. The problem is that time is one commodity the Palestinian Authority doesn't have. It is effectively broke and could start facing a serious cash crunch  as soon as this week. EU foreign ministers were to meet later on Monday in London to discuss whether the roughly €500 million it props up the Palestinians with each year would continue to flow.

Ahead of Merkel's visit on Monday with Palestinian President Mahmoud Abbas, whose Fatah faction was trounced in the elections, the German press looks at the implications of her visit for western policy in the troubled region.

The business daily Handelsblatt shows understanding for Merkel's reluctance to be the first western leader to deal with Hamas. Nevertheless, the paper believes eventually both Israel and the west will be forced to work with the Muslim extremists. "No one wants to be the first to break the ice or get their hands dirty," writes the paper. "But the reality is that the Palestinian territories are so tightly tied to Israel that a dialogue or at least coordination with Hamas is unavoidable." The paper is hopeful that Hamas' participation in any future Palestinian government could be a moderating influence on the group. "After its election victory, Hamas should have the chance to work out and present its program for governing. Who knows, maybe a critical dialogue with the west will help it find the right way. The west gives up nothing by doing so, but rather simply respects a democratic decision." A political cartoon next to the editorial has a less rosy take on the situation: The drawing depicts Merkel talking to Abbas with a gigantic shoe labeled "Hamas" squishing him. "Yes, the pressure has increased a bit," reads the caption.

The left-wing Berliner Zeitung comments that during her visit Merkel will be emphasising the basic German position of solidarity with Israel. This is manifest in her demand that Hamas turn its back on terrorism and recognize Israel. "Her position carries some weight as she could be seen as a representative of the European Union, which supports the Palestinian Authority in the form of millions of euros worth of aid, which Hamas would also be dependent upon," the daily opines. However, the paper also points out that "it is not enough to make demands and then wait to see if and when Hamas comes around." Merkel and the Israeli government may have stipulated that a renunciation of violence is the basic precondition for talks but "in truth, they both know full well that this can only be the first aim in any dialogue with the new rulers in the Palestinian areas." The paper predicts that -- in the interest of Israeli security -- talks with the Hamas leadership will not only take place soon but that they will take place before there is any indication that Hamas have turned their backs on violence. "Yet this will not happen in the open," it writes. "The Middle East is entering a new phase of secret diplomacy."

The center-left newspaper Süddeutsche Zeitung makes it clear that Merkel faces an extremely difficult and delicate task: "With the eyes of the world upon her, she is entering the minefield of the Middle East." The paper comments that she somehow has to show solidarity with the Israelis, without being used as an instrument in their election campaign, and she must also avoid any contact with the Hamas leadership. Merkel will also be trying to persuade President Abbas not to resign as "he seems weary of office" and is being blamed by his own movement for their loss of power. This weekend he had to cancel a trip to the Gaza Strip out of fear of being attacked by furious Fatah mobs. "Merkel's visit to Ramallah on Monday should serve to strengthen his position. In the future Abbas should serve as a bridge between the Hamas government and the west," writes the paper. The western states need Abbas so that they don’t have to have any embarrassing encounters with a Hamas leadership that has not sworn off terrorism. The SZ also points out that Merkel's delicate mission to the Middle East is a continuation of the intermediary role played by former foreign minister Joschka Fischer, who had to try to dispel Israel's mistrust of the EU while at the same time reminding the Palestinians of their responsibilities to do all they could to tackle terrorism.

-- Marc Young and Siobhán Dowling
12:48 p.m. CET

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Farewell to the Wizard

It's not just America's captains of industry who are getting misty-eyed about the departure of US Federal Reserve chairman Alan Greenspan. After serving as steward of the US economy for the past 18 years, Greenspan will step down as head of the American central bank on Tuesday. Over his extremely long tenure, the 79-year-old has probably had more influence on the global economy than any other person in modern history. He has guided the Fed through several crises and an unparalleled economic expansion. He oversaw the Internet dotcom boom and bust and coined catchy phrases like "irrational exuberance" to characterize investors getting ahead of themselves. Eventually he became such a feature of the world's increasingly intertwined economy that he took on an aura of the world's economic wise man, who could move global markets with on offhand comment. Of course, some argue that he never made "offhand" comments and that his often completely perplexing language was all very calculated to herd stock brokers and bond traders where he wanted.

With Germany the world's biggest exporter and its economy tightly tied to that of the United States, Germany's editorial pages were aflutter about Greenspan's legacy and what his successor, Ben Bernanke, will have to do to try and fill his shoes.

Under the headline "Farewell to the Wizard," the conservative Frankurter Allgemeine Zeitung lauds Greenspan's contributions to world economic stability and growth. "In a hall of fame for central bankers, Alan Greenspan would be guaranteed a prominent place," writes the daily. He "has not only done great service by the American economy, but also the entire world economy." The paper praises Greenspan's crisis management skills that helped avoid worse damage to the economy during both the so-called "Black Monday" on the US stock market in 1987 and after the terrorist attacks of Sept. 11, 2001. "The willingness of the Fed to cover potential liquidity crunches unbureaucratically and quickly was key to calming the markets," opines the FAZ. Likely hoping to avoid falling too much under a spell of macroeconomic hero-worship, the paper does point out that Greenspan certainly wasn't free of blame for the bubble caused by the Internet craze and for the "frothy" speculation that continues to endanger real estate markets in much of the industrialized world.

The center-left Süddeutsche Zeitung keeps to the supernatural theme by calling Greenspan "the magician of the financial markets" who cast his spell simply by mumbling a few undecipherable sentences now and again. The paper also pities his successor Bernanke, writing that the economics professor will have a hard time getting out from Greenspan's huge shadow. The new Fed chairman's job will be made even harder due to the fact that America -- with its ballooning deficits -- is living far above its means at the moment. "In recent years, Americans have bought pretty much everything that wasn't nailed down. That consumer frenzy fired on the economy. But now even they aren't so quick to pull out their wallets anymore," writes the paper. Especially if energy prices continue to push up inflation, Bernanke could soon be faced with his first real test, says Süddeutsche.

The right-wing daily Die Welt devotes an entire page in its business section to the man they call "Mr. Dollar." Across the top the paper has a graph tracking the course of the Dow Jones over Greenspan's 18-year tenure. "Under no other central bank boss since the end of the Second World War have there been so few recessions, and mild ones at that," writes Die Welt. "It's a mix that has appealed to stock market investors. The Dow Jones gained almost 20 percent annually in the Greenspan years." As for Bernanke, Die Welt admits he is taking over the helm of the US economy at an especially difficult time -- partially because Greenspan was quick to increase liquidity in difficult times. But the paper also points one that even Greenspan had to contend with doubts when he took over from Paul Volcker.