Palestinian negotiators said a hoped-for deal this week on a unity government could be delayed by difficulties in working out a parallel prisoner swap with Israel.
The Palestinian president and premier, heading the rival Fatah and Hamas factions, have been trying to wrap up the deal in an effort to end the economic sanctions and pave the way for a resumption of long-frozen talks with Israel. The negotiations have been dragging on for months.
Israel and Western donor nations imposed the sanctions on the Palestinian government after Hamas won legislative elections earlier this year. Despite widespread hardship caused by the sanctions, Hamas has rejected international calls to renounce violence, recognize Israel or accept past peace agreements.
Palestinian President Mahmoud Abbas has been pushing Hamas to enter a coalition with Fatah in hopes of ending the sanctions. He hopes the government will endorse a softer position to Israel that will enable him to resume peace talks.
The concept is to replace the Cabinet of Hamas ministers with independent experts linked to, but not members of, the two movements. Abbas and his Palestine Liberation Organization would be charged with handling peace negotiations, while the Cabinet would deal with the daily affairs of the Palestinian areas.
A senior Palestinian negotiator said the Hamas-led Cabinet would resign within three days to make way for a new unity government.
The negotiator, who took part in Thursday's meeting with Abbas and Palestinian Prime Minister Ismail Haniyeh, spoke on condition of anonymity because the meeting was not public. The two met again on Friday.
"They talked about all issues on the table," said Nabil Abu Rdeneh, a spokesman for Abbas. He did not elaborate.
Ghazi Hamad, spokesman for the current Hamas-led government, said a deal might take a bit longer to reach, but expressed optimism the sides would resolve their differences. A key sticking point is which party will appoint the interior minister, who oversees powerful security forces.
"I hope in a week we will have the formation of the government," Hamad said.
Palestinian officials say the US, which has led international opposition to Hamas, and the EU are ready to accept the united government. But in Washington, State Department spokesman Gonzalo Gallegos said it was too early to say.
"We haven't seen the proposal. It hasn't been presented to us," he said.
Despite the reported progress, Abbas has said he hopes to tie unity efforts to a broader deal that would see Israel release Palestinian prisoners, including several jailed Hamas Cabinet ministers and lawmakers, in return for the release of a captured Israeli soldier. Slow progress on such a deal could delay the creation of the new government.
"How can we go to parliament to vote on a new government while the parliamentarians are still in jail," said Mustafa Barghouti, a lawmaker, who is acting as a go-between in unity government formation.
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