JERUSALEM, March 26 (Reuters) - Prime Minister Ehud Olmert on Wednesday threatened "painful" measures against Hamas and ruled out talks with the Palestinian Islamist group on a possible truce.

"We are not talking to Hamas and we are not going to compromise with someone that is consistently shooting rockets on the heads of Israelis," Olmert told foreign journalists at a news conference, speaking in English.

"We will deal with Hamas in other ways and these ways will be very painful."

With U.S. backing, Egypt has been trying to negotiate a cessation of hostilities between Israel and Gaza militants who fire rockets across the border into the Jewish state.

Hamas has suspended rocket fire in recent weeks, following an Israeli offensive in northern Gaza that killed more than 120 Palestinians, many of them civilians.

Israel has also refrained from carrying out attacks in Gaza against members of the group but it continues to target Islamic Jihad, which has kept up sporadic rocket attacks -- strikes that rarely cause death or injury but have traumatised border towns.

The talks could include the possibility of reopening the Rafah crossing between Gaza and Egypt, which was blasted open by militants in January in defiance of an Israeli-led siege on the territory. It has since been resealed.

Olmert said on Wednesday Israel was willing to allow humanitarian goods through Rafah.

"We will allow the transfer of all the humanitarian needs through all the crossings, including the Rafah crossing, as part of this effort. But this is as far as I'm prepared to go."

Olmert also reiterated that Hamas was an "obstacle" to U.S.-backed efforts to create a Palestinian state. But he added: "It is not an insurmountable obstacle. It can be overcome."

Israel tightened its cordon around Gaza after Hamas seized control in June following fighting with Palestinian President Mahmoud Abbas's Fatah forces. Israel is under international pressure to ease restrictions on Gaza's 1.5 million inhabitants.

Hamas opposes peace talks with Israel. (Reporting by Adam Entous; Writing by Rebecca Harrison; Editing by Sami Aboudi)

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