The UK has indicated it could be prepared to do business with the Islamic group Hamas, in comments that underlined the growing difference in approach between Europe and the US on how best to pursue peace in the Middle East.

Speaking in London on Thursday ahead of a meeting with Mahmoud Abbas, Palestinian Authority president, Tony Blair, British prime minister, welcomed the agreement earlier this month to form a Palestinian government of national unity. He even anticipated working with officials from Hamas, which agreed during talks in Mecca to set up the government with Mr Abbas's Fatah party.