Veteran Israeli politician Shimon Peres has left the Labor Party to support the newly formed centrist faction of his long-time rival, Ariel Sharon. Meanwhile Palestinian groups, including the militant Hamas, are set to hit the campaign trail. What are the implications of these developments and the upcoming Israeli and Palestinian elections for the peace process?

The move had been expected, but Shimon Peres made it official when he announced this week he is leaving Labor to throw his support behind perennial rival Ariel Sharon and his new centrist Kadima Party.

Mr. Sharon recently left the right-wing Likud Party, which he co-founded, because he felt it would stand in the way of his efforts to secure Israel's borders and make peace with the Palestinians.

The political landscape in Israel is shifting, with what remains of Likud moving further right and with Labor, under the new leadership of former union boss Amir Peretz, moving more to the left. A big remaining bloc appears to be forming in the middle.

Opinion polls show Kadima well ahead of either Labor or Likud, and Mr. Peres' support is seen as a further boost - all well ahead of national elections scheduled for late March.

Political columnist Akiva Eldar of Israel's liberal Haaretz newspaper says many people trust Ariel Sharon for his toughness and ability to pull off the controversial Israeli withdrawal from Gaza and small bits of the West Bank several months ago.

"Israelis are hoping Sharon can do more of the same," he said. "They believe that only Sharon can do this and not the Israeli left or Labor. So, they trust the old man."

The Palestinians are undergoing their own political shake-up with preparations under way for legislative elections on January 25.

Hamas this week announced a slate of candidates, while the mainstream Fatah faction has been holding first-ever primaries to choose its slate. Those primaries have already seen the rise of some of Fatah's younger political generation.

The elections are seen as a test of the strength of the Islamic parties and analysts believe they could also lead to a shakeup of Fatah, with many of the old guard losing out to younger, populist voices.

Palestinian politician and long-time peace negotiator Saeb Erekat says these developments are very significant.

"What is going on in Palestine are not your normal, typical elections," he said. "It is a turning point in Palestinian political life. The elections in Israel and the divisions that are happening in Israel, the reformation [realignment] of parties - it is something that may change the face of political life in Israel."

Mr. Erekat was in Washington this past week to meet with Bush administration officials and members of Congress and to elicit support for the upcoming elections. He spoke to reporters at a gathering sponsored by the Middle East Institute and the Palestine Center.

Mr. Erekat says the dramatic political changes bring unprecedented opportunities that must be seized to get peace negotiations back on track.

"I urge the Israeli voters to choose a government that is willing to re-engage in the end-game with us, because I believe the majority of Israelis today want to reach the end-game [final peace deal] and that is true of the majority of Palestinians as well," he said.

Israeli political columnist Akiva Eldar is not so sure that is what the majority of Israelis are looking for.

"They [Israelis] seem to like the idea of unilateral withdrawal because that leaves the control primarily and maybe even exclusively, in Israeli hands," he said. "You do not have to negotiate with the Palestinians and you draw the borders and you go back home."

But Mr. Sharon said recently there would be no more unilateral withdrawal such as the Gaza pullout. He said future negotiations would be along the lines of the road map peace plan, backed by the U.S., Europe, Russia and the United Nations.

Even if the two sides start talks after next year's elections, they have a long way to go and Mr. Eldar fears the same old hurdles will resurface.

"At the end of the day, I am afraid that after the elections we will find the same kind of deadlock, the same kind of coalitions," he said. "I do not see that Sharon wearing the new hat is different from Sharon wearing the Likud hat."

Mr. Sharon's supporters argue he has shown an ability to change and adapt, citing as an example his decision to dismantle the Jewish settlements of Gaza that he once helped build.

Mr. Sharon says he is confident he will win another term as prime minister next March and he has vowed to move the peace process forward. But he has also repeatedly stated that Israel would maintain control over East Jerusalem and major Jewish settlements blocks in the occupied West Bank - issues the Palestinians say are unacceptable in any future peace deal.