International donors have pledged $US7.4 billion ($A8.6 billion) to the Palestinians at a conference described by US Secretary of State Condoleezza Rice as the "last hope" to save their government from bankruptcy.

Australia has pledged $A52 million for Palestinian aid.

Palestinian Prime Minister Salam Fayyad had formally asked donors meeting in Paris for $US5.6 billion by 2010 to help fulfil his plan to develop a viable economy for a future state.

"The real winner is the Palestinian state," French Foreign Minister Bernard Kouchner told news agency AFP as he announced that a total of $US7.4 billion had been promised.

The pledges were made at a one-day conference convened to agree a package of aid to stabilise the Palestinian economy and shore up the peace process with Israel -- jumpstarted in the US city of Annapolis last month.

"We see this conference as an important vote of confidence on the part of the international community," Mr Fayyad said as the conference wrapped up.

Hamas: conspiracy

But Islamist group Hamas, which seized control of the Gaza Strip in June and was not invited to Paris or the Annapolis meeting, labelled it a "dangerous conspiracy" aimed at dividing the Palestinians.

"We support all forms of aid, financial or otherwise, to the Palestinian people. But the Paris conference is coating poison with honey and is a dangerous conspiracy," Hamas spokesman Fawzi Barhum said in a statement released in Gaza.

Some humanitarian groups questioned the benefit of such a massive aid package.

'Leaky bucket'

In London, the development charity Oxfam warned donors were pouring cash "into a leaking bucket", arguing that aid efforts already in place were being seriously hampered by Israeli restrictions on movement.

"The challenge is to fix the leak, not pour faster... Due to Israel's movement restrictions and the blockade of Gaza, millions of dollars of aid for Palestinians are being lost," Oxfam's Middle East director Adam Leach said.

But Tony Blair, Middle East envoy for the diplomatic "Quartet", said the money would be used for "building the capacity and the institutions for the (Palestinian) state."

"Over the next few months what we have got to show to people is that we are capable of making the difference on the ground," he said.

Palestinian president Mahmoud Abbas had earlier warned the almost 90 delegations that the West Bank and Gaza were facing a "total catastrophe" without their aid.

Pledges quickly came pouring in with Ms Rice announcing a US donation of $US555 million for 2008, including $US150 million for budget support.

"The Palestinian Authority is experiencing a serious budgetary crisis. This conference is literally the government's last hope to avoid bankruptcy," Ms Rice said.

The European Commission pledged to donate $US650 million in aid for 2008 alone while Britain and Saudi Arabia announced three-year aid packages of $US490 million and at least $US500 million respectively.

Opening the conference earlier, French President Nicolas Sarkozy pledged $US300 million over three years. Germany promised $US 200 million by 2010 and Sweden offered $US 300 million in 2007 and 2008.

Some $US 3.4 billion of Monday's pledges was to go to the Palestinians in 2008, the first year of Fayyad's three-year recovery plan, a final statement at the end of the conference said.

"This support will be essential for accompanying the political process launched in Annapolis at the end of November," the statement added.

Call to halt settlements

As the conference kicked off, Mr Abbas urged Israel -- represented by Foreign Minister Tzipi Livni -- to freeze all settlement activity in the Palestinian territories to allow the newly-relaunched peace drive to gain a foothold.

"I expect a complete halt of all settlement activities without exception," Mr Abbas said, also calling for the dismantling of 127 "wildcat settlements," the lifting of military checkpoints, a halt to construction of the separation barrier and prisoner releases.

Around 70 countries, as well as all the major international organisations, were attending the Conference of Donors for a Palestinian State, a month after Israel and the Palestinians relaunched negotiations frozen for seven years.

The takeover of the Gaza Strip by Hamas, which won a majority in 2006 parliamentary elections, effectively split the Palestinian territories in half.

Hamas -- pledged to Israel's destruction and shunned by the West – rules in Gaza, while the Western-backed Mr Abbas controls the West Bank.

Main contributions pledged

- European Union: $US 650 million over three years.
- United States: $US 555 million for 2008.
- Saudi Arabia: $US 500 million over three years, according to the conference organisers ($US 750 million pledged according to Palestinians)
- Britain: $US 490 million over three years.
- Spain: $US 360 million over three years.
- France: $US 300 million over three years.
- Germany: $US 300 million over three years.
- Sweden: $US 300 million over three years.
- Kuwait: $US 300 million over three years.
- UAE: $US 300 million over three years.
- Canada: $US 300 million over five years.
- Australia: $US 45 million in 2008.
- Russia: $US 10 million
-Japan earlier said it would donate $US 150 million.
Source: AFP