Israeli Prime Minister Ehud Olmert on Thursday approved the transfer of 170 million shekels (about US$43 million) from Israeli banks to the Gaza Strip, in order to help pay the salaries of Palestinian Authority workers, local media reported.

Olmert's decision came after the request by Palestinian National Authority (PNA) Prime Minister Salaam Fayad, despite that it was opposed both by Israeli Defense Minister Ehud Barak and Foreign Minister Tzipi Livni, said Israel Radio.

The outgoing prime minister defended the transfer, saying that the funds were tax money which Israel had collected on behalf of the PNA, according to the report.

However, Barak and Livni argued that it is likely the funds will end up in the hands of Hamas or other Palestinian militant groups.

Gaza has suffered from a severe cash shortage since Israel placed a blockade on the territory following the Hamas takeover in June 2007.

Two months ago, Barak approved the transfer of 100 million shekels (about US$25 million) from West Bank banks to Gaza banks, at the request of Fayad and Bank of Israel Governor Stanley Fischer, aiming at helping ease the cash shortages in Gaza.