A row has broken out on the eve of Israeli President Shimon Peres’ visit to Washington next week over a move by President Obama to allow US aid to reach the Palestinian Authority even if it is run by a government which includes members of Hamas.

Sources within the Israeli government have described the clause, in the US administration’s emergency spending request to Congress, as an extremely negative development which will give a lead to other western governments and encourage them to transfer funds to Hamas-controlled agencies.

Two contrasting aspects of the Middle East conflict were brought home this week in Geneva and Israel.

In Geveva, there was the circus of the UN’s conference on racism; and in Israel, the revelation to the JC that Prime Minister Binyamin Netanyahu will agree to the principle of a two-state solution to the Israel-Palestine conflict.

Jewish groups in Geneva were in uproar over the response among UN officials to the antisemitic opening-day speech by Iranian President Mahmoud Ahmadinejad. None of the UN hierarchy joined the walk-out, and UN Human Rights Commissioner Navi

Most of Israel came to a standstill earlier today to remember the six million Jews who died in the Holocaust.

Traffic came to a halt and people stood in silence as air raid sirens rang out for two minutes. Many bars and restaurants didn’t open.

President Shimon Peres and Prime Minister Binyamin Netanyahu attended the opening of a Holocaust Remembrance Day ceremony at Yad Vashem on Monday night. They pledged that there would never be a second Holocaust.

Mr Peres said the appearance at the Durban 2 conference of Iranian Presdient Mahmoud Ahmadinejad was "a deplorable disgrace".

Stabilising the Israeli economy, dealing with the Iranian threat and establishing a dialogue with the Obama administration will be the first priorities of Binyamin Netanyahu’s new government, which was sworn in on Tuesday night.

With 30 ministers and eight deputy ministers, Mr Netanyahu’s Cabinet is the largest government in Israel’s history, and is based on a coalition of six parties and 74 members of the Knesset.

The only obstacle still standing in the way of Binyamin Netanyahu forming a government next week is a possible revolt within his own party.

Likud members are angry with Mr Netanyahu for allocating most of the senior cabinet positions to the other parties in his coalition. “We are going to give him a rough ride when he presents the coalition agreements to the Likud Central Committee next week,” said one disgruntled MK. “Netanyahu has given everything away to the coalition partners and Likud, the ruling party, has to make do with leftovers.”

The key appointments in Israel’s new government, being sworn in on March 18, will be Avigdor Lieberman as Foreign Minister and Moshe Yaalon as Defence Minister.

Prime Minister-designate Binyamin Netanyahu has failed to convince the leaders of Kadima and Labour, the mainstream parties in the Knesset, to join his coalition. His new government, therefore, will be based on a narrow, right-wing coalition, leaving Mr Netanyahu no choice but to accede to most of his partners’ demands.

Defence Minister Ehud Barak is considering leaving Labour to join Binyamin Netanyahu's government as an independent MK, according to party sources.

Mr Barak mobilised business leaders, former Supreme Court judges and retired senior IDF officers to lobby his colleagues in an attempt to forge a party-wide coalition with Likud. So far, however, Labour's Knesset members remain overwhelmingly opposed.

"There are rumours that Barak has support from the party for coalition talks," said MK Danny Ben-Simon. "But the rumours are being put out by Barak's political advisors.

Sources close to Prime Minister-elect Binyamin Netanyahu have warned that they anticipate "a tough time" from the Obama administration over the Middle East peace process.

Visiting Israel this week, Secretary of State Hillary Clinton gave a clear indication that she expected Israel to do more on both the Palestinian and Syrian fronts.

"Clinton left us with no illusions," said a senior adviser to Mr Netanyahu.

Likud leader Binyamin Netanyahu has been asked to form a government and be the next prime minister of Israel.

President Shimon Peres met Mr Netanyahu and Kadima leader Tzipi Livni this morning, and will entrust the former PM with creating a coalition.

Mr Netanyahu is likely to ask Ms Livni and Labo u r party chairman Ehud Barak to join him in a broad administration, although Ms Livni has suggested she will turn down any approach.

The new prime minister will have six weeks to create a cabinet.