BRUSSELS, June 12 (Reuters) - The European Union said on Tuesday there was a risk of civil war if Palestinian factional fighting did not end immediately.

Speaking after talks with Palestinian Information Minister Mustafa al-Barghouthi, EU External Relations Commissioner Benita Ferrero-Waldner said the bloc was "extremely concerned" about the recent flare-up in violence.

"There is an immediate need for a ceasefire both in Gaza and the West Bank and this National Unity Government has to be consolidated...otherwise we see the risk of a civil war," she said.

"If the spiral of violence continues, this risk could be very imminent."

Ferrero-Waldner told a news briefing she had discussed with al-Barghouthi how the EU could respond more quickly to the needs of the unity government but said a bar on direct budgetary assistance remained in place.

Western donors led by the United States cut off direct financial aid to the Palestinian Authority in March 2006 after the militant Hamas group defeated President Mahmoud Abbas's secular Fatah faction in a parliamentary election.

Al-Barghouthi welcomed EU support for the government. "What is happening today in terms of fighting is a reflection of the status of despair, and poverty and lack of hope," he said.

He called for international pressure on Israel to release more than $800 million of Palestinian tax revenues he said it had been withholding -- 65 percent of the income of the Palestinian Authority.

The EU has increased humanitarian aid and remains the largest donor to Palestinians. EU officials have insisted that despite formation of the unity government by Fatah and Hamas in March the bloc will not help Hamas until it renounces violence and recognises Israel.

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