Livni was responding to calls from Italian Prime Minister Romano Prodi and British parliamentarians for a dialogue with Hamas.

« I know that it looks tempting and I know that the international community is eager to see a kind of an understanding between Hamas and Fatah," Livni said at a press conference with visiting Japanese Foreign Minister Taro Aso.

"This is wrong. This is a mistake. Big mistake. Huge," she said.

Prodi, who is considered to be a friend of Israel, said last Sunday that "we need to recognize that Hamas exists. It’s a complex structure that we should help to evolve towards pro-peace positions. One must push for dialogue so that it happens and not shut anyone out of dialogue."

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He made the comments during a conference with Israeli and Palestinian youths attending a summer camp in Castiglione della Pescaia, in Tuscany, whe the Prime Minister is vacationing.

Prodi phoned Israeli Prime Minister Ehud Olmert on Tuesday.

According to Prodi’s spokesman, Silvio Sircana, he told him that Hamas must fulfill the conditions set out by the Mideast Quartet before negotiations can resume: recognize Israel’s right to exist, renounce violence and accept previous agreements.

Sircana, however, drew a distinction between "contacts" and "negotiations" with Hamas saying contacts "can also be informal," the Italian ANSA news agency reported.

On Monday, the British Parliament’s Foreign Affairs Committee called on the UK Government to open talks with Hamas, saying it is ‘’counterproductive’’ not to talk to the Islamic group.

Britain, like the EU, considers Hamas a terrorist organisation and say it will not deal with it directly until it renounces violence and recognises Israel.