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The UN's top humanitarian, Sir John Holmes, said yesterday that the deteriorating economic and humanitarian situation in the Palestinian territory was a "political crisis" that needed a "political solution". He spoke as the Israeli prime minister, Ehud Olmert, said the people of Gaza could not live normal lives while Israelis across the border were constantly targeted by rockets.

Speaking in Jerusalem at a gathering of the Conference of Presidents of Major American Jewish Organisations, Olmert said Israel's military had a "free hand" to hit Gaza militants. "We will reach out for anyone involved in terrorism against Israelis and will not hesitate to attack them," he said. "That applies to everyone, first and foremost Hamas."

Speaking separately at a briefing to journalists, Holmes said: "The problems won't be removed without a political solution." But the under secretary general for humanitarian affairs and emergency relief coordinator, who is on a five-day visit to the region, said that as a humanitarian he had limited control over the UN's key political decision-making body, the security council. "I don't come expecting to work miracles. The situation is extremely difficult, the politics extremely difficult."

He arrived in Jerusalem on Thursday at the start of a five-day visit which took him to Gaza, the West Bank and the rocket-afflicted Israeli border town of Sderot.

Yesterday, he was unwilling to be drawn into finger-pointing. "I don't think it's helpful to get into a blame game approach for who is responsible," he said, when asked who should cease hostilities first.

Israel has been blockading Hamas-controlled Gaza for the past eight months, strangling commercial activity into and out of the strip. The embargo has resulted in severe shortages of building materials, forcing about $215m-worth of development projects to be suspended. Some officials have warned of a looming public health disaster from unrepaired, leaking sewage and water facilities.

Last month Israel stepped up the restrictions, cutting fuel and electricity supplies in an attempt to stop Palestinian militants firing rockets into its territory.

Holmes demanded that the Palestinians cease their rocket attacks, but said Israel's blockade was "collective punishment" which violated international humanitarian law. The blockade also appeared to be counter to Israel's security interests, he said. "Are they changing people's attitudes? It doesn't look like it in any significant way. It's hard to be sure."

But Olmert's spokesman said the blockade was working. Olmert was under significant political pressure, especially from the traumatised residents of Sderot - a target of the Palestinian rocket attacks - to strike even harder against Hamas. "We think the international isolation of Hamas is a very important part of the changing the regime," the spokesman said.

When asked about his failure to secure meetings with Israel's defence and foreign ministers, Holmes said: "You will have to ask them why not." A spokesman for the foreign affairs minister, Tzipi Livni, said a clash of scheduling was the reason.

Holmes indicated that he saw little prospect of a deal by the end of the year as anticipated by the US-initiated Annapolis peace process. "There's a disconnect between the reality on the ground and the parallel peace process," he said.

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