(Adds quotes from news conference)

By David Brunnstrom

BRUSSELS, May 14 (Reuters) - A senior EU official on Monday urged an early review of suspended aid to the Palestinian government, saying she hoped for a decision next month.

Speaking after talks with Palestinian Foreign Minister Ziad Abu Amr, EU External Relations Commissioner Benita Ferrero-Waldner spoke of "encouraging" signs from the Palestinians.

"Of course we are not yet there," she told reporters, referring to Palestinian calls for a resumption of aid suspended since a Hamas-led administration came to power last year.

"But I think it is important that we see positively what has been mentioned and we will have to see in the future. We will have the next Council and hopefully the next Council can take decisions on that," she said of a June 18-19 EU ministerial.

Ferrero-Waldner noted that the EU was continuing with a major aid mechanism to channel funds to needy Palestinians while bypassing Hamas.

"Now in the future we have to see how we can go on," she said. "We are always judging the government also on its programme and its actions. We see good progress at least there."

The EU cut off direct aid when Hamas refused to recognise Israel, renounce violence or accept interim peace deals and refuses to deal with the group of its ministers until the government "reflects" international conditions.

It remains though the biggest aid donor to the Palestinians and since the formation of a new government in March has eased its boycott, talking to non-Hamas ministers and considering ways of resuming some direct aid to the Palestinian Finance Ministry.

"TECHNICAL ISSUES" OBSTRUCT AID

Ferrero-Waldner told a news conference "technical issues" still had to be resolved to allow use of a Palestine Liberation Organisation account to channel funds, but she hoped at least to be able to raise the issue at a future ministers' meeting.

Non-Hamas Palestinian Finance Minister Salam Fayyad has been counting on using the account he controls to receive $55 million Arab League members have promised to pay each month to cover about half the salaries of governmental employees.

A commission spokeswoman said said last week that any decision to make a direct payment to the account would require assent of EU ministers and it was not on their agenda on Monday.

Arab League Secretary General Amr Moussa told the news conference there was no justification for the EU position, which he termed "really unfair". He said it was vital to take advantage of the window of opportunity for Middle East Peace.

Last week senior U.S. officials said Washington had decided to offer fresh assurances that giving money through the PLO account would not violate U.S. sanctions and these would come through an exchange of letters with the European Union.

One U.S. official said the U.S.-EU letters, if they were sent, would make clear money transferred to the PLO account cannot be transferred to the Hamas-led government, thereby keeping the ban on direct aid to the government in place.

Fererro-Waldner repeated calls on Israel to release Palestinian customs revenues it has been withholding and for Arab countries to provide funds they have promised.

(Additional reporting by Ingrid Melander)

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