By Nidal al-Mughrabi

GAZA, May 5 (Reuters) - Hamas, which heads the Palestinian unity government, roundly rejected a U.S. proposal on Saturday for a timeline of measures intended to help resume peace talks with Israel.

"The American plan is rejected and we will work to make it fail by any means and by all means," said Fawzi Baroum, a Hamas spokesman in Gaza, echoing comments by the Islamist movement's exiled leader Khaled Meshaal.

Meshaal told a rally in Damascus on Friday: "I officially declare Hamas's rejection of this document or any American, European, Israeli or even Arab project that diminishes the Palestinian cause like this ... It is a formula of lifting the roadblocks in return for halting the resistance."

Israel, where Prime Minister Ehud Olmert's authority has been crippled by a damning official inquiry, has also responded coolly to the U.S. plan, which calls for Palestinians to curb militant activity and Israel to ease travel restrictions.

An official on Olmert's staff told Reuters on Friday: "Some of the ideas, Israel is already implementing, others are already well advanced and there are some that Israel will not be able to address in the present because of security concerns."

In Washington on Friday, a State Department spokesman played down a timeline put forward in the document, presented in the past week to Olmert and Palestinian President Mahmoud Abbas.

"These benchmarks don't constitute a plan with fixed deadlines," said Tom Casey. "They are a flexible set of targets."

BENCHMARKS

Officials who have seen the document say it calls for some Israeli measures to ease movement in and out of the Gaza Strip by May 15 and for security forces under Abbas to clamp down on militant arms smuggling and rocket attacks during June.

Abbas, from the secular Fatah party which lost power to Hamas in an election a year ago, is due to meet Hamas Prime Minister Ismail Haniyeh in Gaza on Sunday to discuss security, Palestinian officials said.

Tension between Hamas and Fatah, whose militants have clashed over the past year, remains high despite their forming a new unity government in March to ease friction and seek an end to international sanctions imposed on the Palestinian Authority last year in response to Hamas's refusal to renounce violence.

German Foreign Minister Frank-Walter Steinmeier, whose country holds the presidency of the European Union, met Palestinian officials in the West Bank on Saturday and was due to meet Abbas later. He said he was encouraged by Arab states' support for a new peace initiative and stressed it was important to maintain momentum despite political upheaval in Israel.

On Monday, a government-appointed inquiry commission said Olmert had made grave errors of judgment in his conduct of last year's war against Hezbollah guerrillas in Lebanon. He has vowed to stay on to put right the mistakes and has rejected calls for him to resign -- including from his own foreign minister.

However, analysts say, the crisis looks set to hamper the Israeli government's ability to make major decisions.

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