Visiting German Chancellor Angela Merkel said Sunday that international sanctions on Palestine would remain in place because the Palestinian coalition government has refused to accept conditions raised by the Middle East Quartet to relaunch the region's peace process.

Speaking at a joint press conference with Palestinian President Mahmoud Abbas, Merkel urged the new Palestinian coalition government to "do everything possible to ensure that the entire national coalition government accept the Quartet's criteria."

"Only those who renounce violence, accept Israel's right to exist and accept previous agreements, can be a partner in further (peace) efforts," she said.

"The EU has decided not to deal with the government," said Merkel, who is also the current rotating EU president. "Some of the government ministers do not accept our criteria."

With the Palestinian government refusing to meet the Quartet's conditions, international sanctions that prevent millions of dollars from flowing through the Palestinian Cabinet have remained in place.

The Quartet of international mediators includes the EU, Russia, the United Nations and the United States.

Abbas said the Palestinian National Authority (PNA) was committed to the Quartet's demands, looking to expand a ceasefire with Israel and release captive soldiers.

He also affirmed however that Israel must stop its unilateral measures, including settlement expansions and the construction of the West Bank barrier. He also stressed that Israel must release Palestinian tax revenues.

"I call on the Israeli government to take constructive steps to answer the peace initiative put forward by Arab countries," Abbas said.

Merkel revealed that an economic delegation will visit the Palestinian territories soon to look for investment opportunities and rebuild the collapsing Palestinian economy. Abbas welcomed the move.

Merkel's visit to the Palestinian territories was part of her Middle East tour. She arrived in Jerusalem on Saturday and held talks with Israeli Prime Minister Ehud Olmert after a stop in Jordan, where she met King Abdullah II. She will also visit Lebanon.