Merkel Pushes for Peace

The official SPA news agency said Merkel was welcomed by Crown Prince Sultan bin Abdul Aziz, the defense minister, along with other ministers and Saudi officials.

The chancellor was to meet King Abdullah for talks on the Middle East, and diplomatic sources said she would also meet the secretary general of the six-nation Gulf Cooperation Council.

Merkel arrived from Cairo, where she met Egyptian President Hosni Mubarak and Arab League Secretary General Amr Mussa.

After her talks with Mussa, she called for better coordination of international initiatives on Middle East peace.

"There should not be different signals coming from different continents," Merkel told journalists.

A German official, speaking on condition of anonymity, said Mussa "urged the Europeans to play a big role in solving the Middle East conflict, especially by pushing the Americans to increase their involvement in the quartet."

The so-called quartet of major players -- which includes Russia, the United Nations and the United States, as well as the European Union -- convened Friday to revive their roadmap peace plan, which has made next to no progress since its launch nearly four years ago.

Mubarak: Palestinian unity government forming

During her meeting Saturday with Mubarak, Merkel stressed the importance of an end to the violence between the Palestinian governing movement Hamas and the rival Fatah party of Abbas.

Mubarak announced that the formation of a unity government acceptable to Western donors should be imminent.

"We are working toward a national unity government," he told reporters after the meeting. "It is about to be finished, unless there are any surprises."

Egypt is the chief mediator in the Palestinian crisis but has so far failed to clinch a deal for a unity cabinet, seen as a key step towards resuming international aid to the cash-strapped Palestinians, who have not received western aid donations since March.

Conditions to lifting aid freeze

Merkel, whose country holds the rotating presidency of the European Union, reiterated the West's conditions for lifting the financial boycott.

Hamas has to recognize Israel's right to exist, renounce violence and accept past agreements with the Jewish state, she said.

Hamas accused western countries of taking "decisions that ignore reality." Fatah said it had hoped that "the oppressive siege on the Palestinian people" would be lifted.

Firefights across Gaza City

Sporadic gun battles between the rival factions rattled the streets of Gaza City for a third straight morning Sunday, despite a ceasefire declared by their leaders.

However, the fighting was more subdued than in the past three days, when 28 Palestinians were killed and around 260 wounded in some of the fiercest internecine bloodletting since the Islamist Hamas defeated Fatah in elections last year.

The German chancellor was also expected to discuss the political crisis in Lebanon, the surge in sectarian violence in Iraq, Iran's nuclear ambitions and efforts to end the four-year-old fighting in Sudan's Darfur region.