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The US administration banned its officials on Wednesday night from meeting the Islamist group Hamas, as the new Palestinian government was sworn in and while Israel’s centrist Kadima party opened talks to form a coalition after winning the largest number of seats in Knesset elections.

US officials in the region were instructed by e-mail on Wednesday to have no contacts with Palestinian ministries from 6pm last night.

Canada also announced last night it was suspending assistance to the Palestinian Authority because the new Hamas-led government refused to renounce violence and recognise Israel.

The US brands Hamas a terrorist organisation and bans all contact with the group. But the impact of that policy will become more severe with Hamas now in government.

Washington wants Hamas, which won by a landslide in Palestinian elections in January, to recognise Israel, renounce violence and abide by previously signed peace accords before it will consider a change in attitude.

The US policy will now affect not just Hamas min-isters but also independents and technocrats in the newly formed Palestinian government – though US officials will still be able to speak to Mahmoud Abbas, the Palestinian president.

However, Omar Abdel-Razeq, the new government’s finance minister, said he believed that Europe would eventually encourage a rethink of the boycott.

He told the Financial Times: “We believe these positions will be reversed, hopefully by Europe in the beginning and later by the US once they realise that we are serious about the financial transparency and accountability they have been demanding from the Palestinian Authority.”

The Palestinian Authority is facing chronic shortfalls in a budget that runs to about $160m (£92m) a month. The US, which has given $1.5bn over the past decade, will donate only to humanitarian agencies in future.