Canada has ended all relations with the new Palestinian government, Ottawa announced Wednesday.

• INDEPTH: Hamas

Canada has ended any contacts with the members of the Hamas cabinet and is suspending assistance to the Palestinian Authority, Foreign Affairs Minister Peter MacKay said.

Foreign Affairs Minister Peter MacKay says Hamas must change its policies.(CP file photo)

"Not a red cent to Hamas," MacKay said on CBC's Inside Politics. "This is a terrorist organization."

Hamas members were sworn in as the Palestinian cabinet on Wednesday. The militant group has refused to recognize Israel, renounce violence and agree to follow existing plans to bring peace to the region, as Canada and other countries have demanded.

"They have to change," MacKay said.

The Canadian International Development Agency gives an average of $25 million a year to help Palestinians and their government. But much of that flows through aid agencies and the UN, so Ottawa is actually cutting just $7.3 million.

That money includes:

• $6.3 million between 2005 and 2008 for housing rehabilitation and policy development.
• $400,000 to study helping Ramallah to refurbish and manage its industrial park.
• $600,000 so the Palestinian justice minister can meet justice ministers from Israel, Jordan and Egypt.

MacKay said Ottawa does not want to hurt individual Palestinians, so it's looking at redirecting the money to directly help people "and hopefully in the same amount."

MacKay and International Co-operation Minister Josée Verner announced the change just after the Hamas cabinet was formally sworn in on Wednesday.

Hamas replaced Fatah as the dominant Palestinian political party after winning the parliamentary election in January.

Canada and other countries had threatened to withdraw funding from the Palestinian Authority, which performs many government functions in the West Bank and Gaza, unless Hamas amended its policies.

Canada will resume payments to the Palestinian Authority only if Hamas agrees to change its policies, MacKay said.

The Hamas cabinet of 24 members includes 14 who have been jailed by the Israelis.

Israel has stopped paying the Palestinian Authority tens of millions of dollars in taxes it collects on the authority's behalf, and will consider additional sanctions.

It has forbidden Hamas leaders from travelling between the West Bank and Gaza, so there were two ceremonies to swear in the new cabinet.

Ismail Haniyeh, the new prime minister, was sworn in by Palestinian President Mahmoud Abbas in Gaza.

Abbas, a moderate, was elected in a separate vote last year. He heads Fatah.