Palestinian prime minister resigns, paves way for Fatah, Hamas unity talks

RAMALLAH, West Bank -- The Western-backed Palestinian prime minister submitted his resignation Saturday, improving the odds of a possible unity government of Fatah moderates and Hamas militants, followed by new Palestinian elections.

Salam Fayyad announced he will step down once a new government is formed, but no later than the end of March. Unity talks between the Islamic militant Hamas and the Fatah movement of moderate Palestinian President Mahmoud Abbas are to resume this week in Cairo. Abbas aides said if the negotiations fail, Abbas might reappoint Fayyad.

Fayyad was appointed prime minister by Abbas in June 2007, following Hamas' violent takeover of Gaza. The takeover led to a deep split between Fayyad's internationally backed administration in the West Bank and the widely shunned Hamas government in Gaza, whose borders were sealed by Israel and Egypt.

Still, both sides appeared optimistic Saturday about a power-sharing deal.

"Everyone needs a lifeline," Ahmed Yousef, a Hamas official, said of the rivals. Previous unity accords collapsed in acrimony, but both sides seem to have stronger reasons now to compromise.

After Israel's recent military offensive in Gaza, Hamas needs Fatah's international respectability to help end the border blockade and obtain foreign funding to rebuild Gaza. Last week, dozens of donor countries promised $5.2 billion for Gaza reconstruction and the Fayyad government.

Abbas, meanwhile, needs to find a way to blunt political challenges by Hamas, which maintains his four-year term expired in January. Abbas' support at home has eroded steadily, both because of his perceived lack of decisiveness during the Gaza war and because his yearlong peace talks with Israel produced no results. Abbas is the leading Palestinian proponent of a peace deal with Israel, but with a right-wing government poised to take power in Israel, chances for new talks are slim.

Fayyad said Saturday he was resigning to "support the efforts being exerted to form a national consensus government that would reunite the homeland."

Hamas has repeatedly demanded that Fayyad step down and officials of the militant Islamic group reacted dismissively.

"This government did not work for the sake of the Palestinians, it worked for its own agenda. This end was expected for a government that was illegal and unconstitutional," said Fawzi Barhoum, a Hamas spokesman in Gaza.

Despite the sour note, preparations for Egyptian-brokered unity talks were moving forward.

Starting Tuesday, leading Hamas and Fatah officials will meet at an office of the Egyptian intelligence service in Cairo, said Nabil Shaath, a senior Fatah negotiator.

The officials will work in five committees to talk about forming a unity government, holding new elections, reforming the security services, carrying out confidence-building measures and finding a role for Hamas in the Palestine Liberation Organization.

Any agreement on forming a new government must be comprehensive, Shaath said. The talks are to go on for 10 days, but the two sides would keep going after that if there is no agreement, he added.

"We want the dialogue to succeed because we have no alternative," he said.

A unity government could consist of Hamas and Fatah politicians or of independents nominated by the two movements. It would be asked to prepare for presidential and legislative elections in the West Bank and Gaza.

The next legislative elections are due in January 2010, but Hamas officials confirmed privately that they've raised the possibility of postponing the vote for several more months, arguing that both sides need time to improve their standing with the voters.

It was not clear how the international community would respond to a unity government and whether it would keep sending the foreign aid promised to Fayyad. In the past, the U.S. and most European countries rejected any governing role for Hamas.

However, positions appear to have softened among some European nations, particularly after Israel's Gaza offensive which ended with a temporary cease-fire Jan. 18.

Hamas remains in control of Gaza, despite the Israeli military onslaught and the border blockade, underscoring the need for the international community to find a way to deal with the militants. Also, the war deepened the humanitarian crisis, with some 15,000 homes destroyed or damaged, and more than 900,000 of Gaza's 1.4 million people receiving food aid.

In other developments, an internal report by European Union diplomats said Israel is undermining prospects for establishing a Palestinian capital in east Jerusalem because Israel keeps building homes for Jews there and demolishes Palestinian-owned homes.

"Long-standing Israeli plans for Jerusalem, now being implemented at an accelerated rate, are undermining prospects for a Palestinian capital in East Jerusalem and a sustainable two-state solution," said the 20-page report, made available to journalists by the Israel Committee Against House Demolitions. An EU diplomat verified its authenticity.

Israeli government spokesman Mark Regev would not comment on the report, saying he had not seen it. However, he said Israel offered Palestinians in Jerusalem citizenship after capturing the sector in the 1967 Mideast war, and that Arab and Jewish residents of the city are treated the same. Palestinians complain of systematic discrimination by municipal authorities.

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Associated Press writers Mohammed Daraghmeh and Diaa Hadid contributed to this report.