Hamas and Fatah call off talks on unity government

Rivals Hamas and Fatah called off top-level talks on forming a Palestinian coalition government that might ease crippling international sanctions, the latest difficulty in bridging formidable ideological differences.

With the Palestinians stuck, another channel for Mideast progress appeared to open when Israeli media reported that Prime Minister Ehud Olmert had a secret meeting with a senior official from Saudi Arabia. Both sides predictably denied the reports, as they have no official relations.

Palestinian President Mahmoud Abbas, the moderate head of Fatah, postponed his planned trip to Gaza today for coalition talks with Prime Minister Ismail Haniyeh of Hamas.

Senior Palestinian officials said the meeting was called off because Abbas was angered by Hamas officials who accused him of withholding money he controls from the Palestinian people.

Instead, he plans to send Rauhi Fatouh, a former Palestinian parliament speaker, to negotiate on his behalf in talks with Haniyeh, Palestinian officials said.

Since a Hamas government took office last March, a cut-off of Western aid has brought the Palestinian Authority to its knees, leaving most public sector workers without pay for months and shutting down vital projects. Israel and the West hope to pressure the Islamic Hamas to recognise Israel, renounce violence and accept previous peace accords.

Hamas, whose suicide bombers have killed hundreds of Israelis, has refused to bend its main goal – an Islamic Middle East without a Jewish state. Broadening the government to include Fatah, which favours peacemaking, could provide a way to bridge the ideological impasse, by entrusting negotiations with Israel to Abbas.

In the meantime, Hamas and Fatah hope, a so-called unity government would allow the flow of international funds to resume.

A preliminary coalition agreement the two sides reached earlier this month is based on a platform calling for a Palestinian state in the West Bank and Gaza. Some say that implicitly accepts Israel next door, without stating the recognition.