Plans for a more moderate Palestinian national unity government are on hold, after the ruling Islamic militant group Hamas refused to soften its position toward Israel. Hamas is challenging Palestinian moderates, who say the emerging government would accept Israel's right to exist.
Hamas says it will not join a Palestinian unity government with the more moderate Fatah party, if recognizing Israel is a condition. Hamas had agreed to form a unity government two weeks ago, in a bid to end crippling international sanctions.
But talks hit a snag after Palestinian President and Fatah leader Mahmoud Abbas addressed the U.N. General Assembly on Thursday. Mr. Abbas said a unity government would recognize Israel and renounce violence.
He was responding to pressure from the United States, which said sanctions would not be lifted, unless Hamas softens its position toward Israel. Secretary of State Condoleezza Rice spelled out the U.S. position at the U.N.
"It goes without saying that, it's hard to have a partner for peace, if you don't accept the right of the other partner to exist," she said.
But Hamas says it will not recognize a state that stole Palestinian land.
"Why should we recognize Israel, if it does not recognize Palestinian rights?" Hamas spokesman Ghazi Hamed said on Israel Radio.
Mr. Abbas is trying to break the impasse with a compromise formula. Officials say he would not ask Hamas to explicitly recognize Israel, but to abide by previous peace agreements, which do recognize the Jewish state.
Israeli Foreign Minister Tzippe Livni says the question is, who is calling the shots on the Palestinian side.
"This is a moment in time, in which Mahmoud Abbas has to decide whether the Palestinian Authority will operate on his terms, or on the terrorists' terms," the minister said.
Hamas says it is willing to allow Mr. Abbas to conduct peace talks with Israel, and it is prepared to accept a long-term truce for five or 10 years. But Israel says that would be meaningless, if half of the Palestinian government seeks the destruction of the Jewish state.