GAZA CITY, Gaza Strip, (AP) – The international boycott of the Hamas-led Palestinian government has yielded no results, and as poverty soars and civil war looms, time and options are running out for Israel, the Palestinians and the international community.

The radical Islamic group that took power last March is no closer to moderating itself and no closer to falling.

“All the crises that we have been through in the past seven months proved even to the Americans that there is no way that this government is going to fall by economic pressure,” said Palestinian Cabinet minister Abdel Rahman Zeidan.

It is now clear Hamas will not accept the No. 1 condition for doing business with it: recognizing Israel’s right to exist. And the international community is not about to accept Hamas’s proposed solution: to call a long-term truce, but without abandoning its ideological goal of eliminating Israel.

It has also become clear that the person calling the shots in Hamas is not Prime Minister Ismail Haniyeh or anyone else in the West Bank or Gaza. It’s the exiled Khaled Mashaal, the hard-line ideologue sheltered by Syria, funded by Iran and in control of the money flow to Hamas.

Moderate Arab countries including Egypt, Jordan, Saudi Arabia and most recently Qatar have been trying to defuse the crisis in the Palestinian territories, offering various proposals that would allow Hamas to meet international conditions while saving face.

Mashaal has rebuffed each of those initiatives, according to senior officials of President Mahmoud Abbas’ Fatah Party. That leaves him squarely in the camp of Syria and Iran, the two countries that sponsored Hezbollah in its 34-day war with Israel this summer.

At a news conference in Damascus on Thursday, Mashaal said again that Hamas will not recognize Israel.

Jacob Walles, the U.S. consul general in Jerusalem, acknowledged last week that the pressure on Hamas has not worked and said Palestinians need a new government.

“We’ve been looking for the last six months to see if there was any sign of a change. We don’t see any sign,” he told Palestinian reporters.

The international community’s latest strategy to defuse the crisis involves a $816 million donation from Europe and a new U.S. push to let Gaza export this season’s harvest of cherry tomatoes, strawberries and carnations. But easing the economic pressure could also prolong Hamas’ hold on power.

The failure of Hamas and the Fatah to come together in a national unity government has worsened their feud, exploding into gunbattles this month that killed 12 people.

Among the 3.9 million Palestinians of the West Bank and Gaza, there is deep demoralization.

“People are becoming convinced that if you don’t kill, you will be killed,” said Alaa Herzallah, a 25-year-old Agriculture Ministry employee.

Maher Abu al-Hattal, whose 15-year-old son was killed in Fatah-Hamas crossfire on Oct. 1, said the two groups fought over who would sponsor his son’s funeral, but that he refused to let either do so.

“They are all fighting over a rotten plate of food,” he said, referring to what he called a powerless Palestinian government cowed by Israel. “Whoever wins will still be a loser.”

Meanwhile, schools barely function, 165,000 public workers have gone largely unpaid in the past six months, and Israel imposes increasingly harsh restrictions.

The U.N.’s Office for the Coordination of Humanitarian Affairs says Israel’s military checkpoints and road barriers in the West Bank have multiplied by 40 percent in the past year. The Israeli group Physicians For Human Rights said Thursday that sick Palestinians seeking to cross into Israel for essential medical treatment are routinely refused.

Talk of a meeting next month between Abbas and Israeli Prime Minister Ehud Olmert is tempered by the Palestinians’ despair, and Israel’s frustration over the continued captivity of an Israeli soldier seized by Hamas-linked militants on June 25.

Some Palestinians are calling for a new election. But Hamas and Fatah are roughly tied in opinion polls, so a new vote probably wouldn’t solve the crisis.

Olmert had gambled that Israel’s withdrawal from Gaza a year ago, and his plans for similar pullbacks in the West Bank, would separate Israel and the Palestinians and promote peace by default. But Hamas’ election victory and the summer fighting with Hezbollah have seriously dampened that hope.

Israel would be happy to not rule over the Palestinians, said Miri Eisin, Olmert’s spokeswoman. “But that doesn’t mean that the solution itself right now is to negotiate with somebody who upfront says `we’re not going to recognize you.’ It just doesn’t work that way.”

Prime Minister Haniyeh’s adviser, Ahmed Yousef, insists Hamas has accepted “a drastic change” by offering to honor a truce and allow Abbas to negotiate on Hamas’ behalf. “But you can’t make that big step in one day or two. You have to give the moderates time to spread their message. … We have very conservative people among the Islamists.”

Fatah spokesman Tawfiq Abu Khoussa said time is running out for Hamas to recognize Israel.

“They can’t wait 40 years to get to this stage like Fatah did,” he said. “The world will not wait for them.”