The new Palestinian Prime Minister says his government faces a 'credibility problem' but is nonetheless the only legitimate administration.

Salam Fayyad said restoring security would be his first priority.

His cabinet replaces one dominated by Hamas that was sacked as it seized violent control of Gaza, expelling its Fatah rivals.

Hamas has called the new cabinet illegal but Israel has welcomed it as a possible partner in peace negotiations.

Speaking on a trip to New York, Israeli Prime Minister Ehud Olmert expressed confidence in the new Palestinian government and hinted that Israel could release tax money to it and ease travel restrictions to the West Bank.

Israel has withheld around $700 million in tax revenues it has collected over the past year for the Palestinian Authority because it operates an economic embargo on Hamas.

The US and EU - major donors of aid to the Palestinians - had also sidelined the preceding Hamas-led administration over its refusal to renounce violence and recognise Israel.

Fayyad's cabinet was sworn in by the Palestinian Authority president and Fatah leader, Mahmoud Abbas.