By Peter Apps

LONDON, June 15 (Reuters) - Relief agencies in Gaza said on Friday they were preparing to get back to work as calm returns to the territory after days of fighting but were uncertain what victory for Islamist group Hamas will mean for aid funding.

Aid groups say an international boycott of direct funding for the Palestinian Authority was leading to social and economic collapse even before factional battles between Hamas and Fatah gunmen in Gaza effectively destroyed a fragile unity government.

The fighting closed and damaged hospitals and food distribution centres, killing two Palestinian United Nations relief workers and leaving many aid staff hunkered down in their homes. Most international aid agencies stopped work altogether.

"There is still some instability around the presidential compound but there is an air of things getting back to normal," Care International country director Liz Sime told Reuters. "We are planning on getting back to work on Sunday."

Hospitals are short on essential supplies but there is sufficient food for now, aid workers said, although shortages may arise if the main border crossings with Israel remain closed.

U.N. humanitarian coordinator Kevin Kennedy said the world body was "extremely concerned" about the closure of key border crossings into Gaza, saying they must be quickly reopened. "We're focusing on emergency food distributions and medical services. What we really need to do is be in a position to resume our full programme as soon as possible," Kennedy told Reuters in Jerusalem.

Kennedy said the U.N. had humanitarian supplies on hand in Gaza to operate for "several weeks". But he said: "It's really important to get the economy going again, to restock the shelves."

MAKING GAZA HELL

Aid workers said preliminary contacts with Hamas had been positive and suggested the Islamist group wanted them to continue work.

The Palestinian Authority appeared to no longer exist within the territory except for junior level officials such as hospital administrators, they said.

The United States and Israel were seen as preparing to ease sanctions on President Mahmoud Abbas's secular Fatah-run administration in the West Bank. Sanctions on Hamas-run Gaza are expected to be tightened.

"My suspicion is that Gaza is going to come under an even stronger siege than before," said Mouin Rabbani, senior analyst for the International Crisis Group.

"What the international community will try and do now is turn Gaza into hell while helping the West Bank, to show what you get when you elect people we like."

Basic relief programmes run by the United Nations -- which sustain 70 percent of the population -- and some others would probably continue to be funded, he said, but little else.

Aid agency Oxfam said in a report earlier this week that the boycott on international financial support for the Palestinian Authority that followed Hamas's election victory in 2006 had led to soaring personal debts for Palestinian families.

They said a European Union scheme to pay Palestinian government employees directly had not been a success and that, with a quarter of the population dependent on such salaries, the knock-on effect on the economy had been devastating.

Oxfam and others want European Union foreign ministers meeting on Monday to renew direct aid to the Palestinian Authority but accept the situation is now much more complex.

"I think we simply have to wait and see," said Oxfam Middle East director Adam Leach. "We think that aid must get to the institutions and ordinary people but that is extremely difficult given the dissolution of the government." (Additional reporting by Jerusalem bureau)

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