Canada is cutting aid and relations with the Palestinian Authority, Ottawa announced shortly after the Hamas government formally took power Wednesday.
The decision makes Canada the first country besides Israel to cut off aid.
"The contingency is that until such time as we see a change in position from the Hamas government and the Palestinian Authority, there will be no direct contact, and there will certainly be no aid flowing through that government,"
Foreign Affairs Minister Peter MacKay told reporters Wednesday.
Mahmoud Zahar, the new Palestinian foreign minister and Hamas leader in Gaza, called Canada's decision a "political mistake," while seeming to minimize its implications to the Palestinian people.
"We are not in need of the Canadian money," Zahar told CTV News. "We are not begging. We are going to run a very constructive economic system."
He said that Canada's decision to sever ties only encourages the Israeli government to "starve the Palestinian people."
"This is not serving Canadian interests."
However, in an interview with CTV's Middle East bureau chief Janis Mackey Frayer, Zahar left the door open to future talks MacKay, but only if Canada reverses its stance. "Of course, I would meet him… but not with preconditions," he said.
Meanwhile, Youssef Rizka, the newly-installed Palestinian information minister, said the Canadian position shows obvious bias.
He said the Canadian government should be asking Israel to admit it is occupying Palestinian land.
In an earlier statement, MacKay said the Hamas platform has failed to address concerns raised by Canada and others "concerning non-violence, the recognition of Israel and acceptance of previous agreements and obligations, including the roadmap for peace."
"A clear commitment by the Hamas government to the principles that we and the international community have outlined remains an essential precondition for Canada to resume any assistance to the Palestinian Authority," he said.
International Co-operation Minister Josee Verner, in the same statement, emphasized that there was an important distinction between aid to the Palestinian Authority and to Palestinians.
"Working with our partners and through the United Nations, its agencies and other organizations, Canada will continue to support and respond to the humanitarian needs of the Palestinian people," Verner said.
"Canada will also continue to work with the voices of moderation within Palestinian society.'"
But Atef Kubursi, a professor of economics at Ontario's McMaster University, told Canada AM on Thursday that the move is stifling democracy in the Middle East.
"The issue here is not Hamas," Kubursi said. "The issue with democracy is not whether you like or don't like the result; it's that you accept the result."
"This is a time to moderate the government not a time to turn our backs on it."
Moshe Ronen, co-chair of the Canada-Israel Committee, said democracy has nothing to do with the decision.
"Hamas is a terrorist organization," Ronen said on Canada AM Thursday. "Hitler was elected democratically as well, so democracy has nothing to do with it."
Kubursi said Canada's move was out of step with its previous record of neutrality. He hinted at an American influence on the decision but Ronen rebuffed any connection.
"I don't think it has anything to do with Bush or America," Ronen said. "It's our government finally showing some leadership."
On Wednesday, Palestinian President Mahmoud Abbas swore in the 24-member Hamas cabinet, which includes 14 ministers who served time in Israeli prisons.
The ceremony, which came just a day after Israel's national election, ended a two-month transition period of ambiguity since Hamas' election victory.
As Israel has banned Hamas leaders from traveling between the West Bank and Gaza, the ministers who were not at Gaza City's parliament building, held a separate ceremony in the West Bank. The two sites were connected by video conference.
Israel's presumed prime minister-designate, Ehud Olmert, has said that if he is unable to broker a deal with the Palestinians, he will unilaterally set the borders of Israel and keep large areas of the West Bank.
With Hamas taking the reins, the Palestinian Authority could face a debilitating international economic boycott.
"With Hamas taking over now, you can't have business as usual," Israeli Foreign Ministry spokesman Mark Regev said.
Israel suspended tens of millions of dollars in monthly tax transfers to the Palestinian Authority after Hamas's election victory last month. The Israeli cabinet will decide on additional sanctions next week, Regev said.
