The Palestinian unity deal may finally be signed next Wednesday when Palestinian Authority President Mahmoud Abbas and Hamas political bureau chief Khaled Mashal are expected to meet in Cairo.

Hamas and Fatah officials confirmed this week that an agreement had been reached on holding elections for the Palestinian National Council in both the West Bank and Gaza next May.

Until the elections, a joint government of "technocrats" is to be formed, but the identity of the new Palestinian Prime Minister is still unclear. Hamas insists that Salam Fayyad should resign, while some of the Fatah factions want Mr Fayyad to remain in his post.

Fatah and Hamas signed a unity agreement seven months ago but none of its clauses has so far been implemented due to disagreements over the timing of the new elections and the make-up of the temporary Palestinian government.

Israeli security sources said: "There still doesn't seem to be much common ground between Fatah and Hamas and, despite talk of unity, nothing has yet changed on the ground."

If the two main Palestinian movements are indeed closer to implementing the agreement, it is likely to be as a result of pressure from the new Egyptian regime, plus Hamas's eagerness to take advantage of the Shalit prisoner deal, which increased its popularity among the Palestinian public.