JERUSALEM, Feb 4 (Reuters) - Israel has stepped up preparations for a possible military incursion into Gaza over concerns that fighting between Palestinian factions may lead to renewed attacks on Israel, a newspaper reported on Sunday.

The Haaretz daily quoted senior military sources as saying that such a raid was not an immediate possibility but part of a contingency plan in case the violence escalated further.

More than 80 Palestinians have been killed in fighting that has erupted between rival factions Fatah and Hamas after unity government talks stalled and President Mahmoud Abbas of Fatah called for new elections.

The fighting continued on Saturday despite a new ceasefire deal.

Asked about the Haaretz report, Israeli Foreign Ministry Director-General Aharon Abramovitch said "there is no doubt we are in a difficult period".

He said Israel was watching the violence and was concerned at continued weapons smuggling into Gaza as well as sporadic rocket fire at Israel despite a Nov. 26 truce.

"It is very important to us to be able to achieve dialogue rather than a military confrontation with the Palestinians. This is what Israel and the international community aim for and I hope this is the line that triumphs," Abramovitch said.

The quartet of Middle East peace negotiators on Friday reaffirmed an international aid embargo on the Hamas-ruled Palestinian government. The sanctions were imposed to pressure the militant group to renounce violence, recognise Israel and abide by interim peace deals.

The quartet, comprising the United States, the European Union, the United Nations and Russia, also voiced "deep concern" at the continued fighting between Fatah and Hamas.

Washington has plans to expand its assistance to bolster Abbas's security forces.

Documents obtained by Reuters on Saturday show an $86 million U.S. programme will provide support to 8,500 of Abbas's national security forces and to his nearly 4,000-member presidential guard.

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