Reporting from Jerusalem—
A proposed Palestinian unity government that was touted two months ago as a potential Mideast game-changer has been stalled by familiar political realities and lingering antagonisms.

Since rival factions Fatah and Hamas announced a reconciliation after four years of feuding, the promised coalition government remains unformed due to disputes over who will serve as prime minister. Other goodwill measures, such as mutual prisoner releases, have also gone unfulfilled since May, and public attacks against one another have resumed.

Last week, Gaza Strip-based Hamas officials lambasted Fatah leaders for welcoming the Greek president to the West Bank just days after Greece intercepted a Gaza-bound protest flotilla that was attempting to break Israel's naval blockade in support of the seaside enclave.

Meanwhile, rocket attacks against Israel from Gaza resumed this month for the first time since the unity deal was announced. Previously Hamas, the Islamist militant group that controls Gaza, vowed to curtail such attacks as a sign of cooperation with Fatah, which opposes violence against Israel.

"People are starting to retreat back into their old habits," said Diana Buttu, a former negotiator for the Fatah-led Palestine Liberation Organization. "Now it's almost as though there was never any [unity] announcement."

So far, neither group is pushing very hard to resume top-level negotiations, which broke down last month in Cairo. At the same time, neither side has declared the unity deal to be dead.

"They both seem very comfortable with the situation as it is, with neither full-fledged war nor full-fledged peace," Buttu said.

Each side has different reasons for accepting the state of limbo, analysts and officials say.

Fatah leader and Palestinian Authority President Mahmoud Abbas has grown increasingly concerned that if he bring Hamas back into his government, he will alienate the U.S. and international community, which provides much of his funding, Palestinian officials say.

Abbas also appears concerned about the impact on the statehood-recognition initiative that he has said he will bring before the U.N. in September. Many Western governments, which are now debating whether to endorse Abbas' bid, view Hamas as a terrorist organization. The U.S. has threatened to cut financial support to a Palestinian government that includes Hamas, unless Hamas renounces violence and recognizes Israel.

In an attempt to appease international concerns, Abbas is insisting that the new government be led by current PA Prime Minister Salam Fayyad, a former World Bank official who enjoys strong Western backing. Hamas rejects Fayyad as a "tool" of the U.S. and Europe.

"It's apparent that Abbas is responding to the American pressure," said Mukhaimar Abu Saada, professor of political science at Al Azhar University in Gaza. "Abbas wanted to go united to the United Nations in September, but the American threats made him think twice about finalizing the unity deal with Hamas.

"Going there with a government that is unrecognized by America and its allies will definitely weaken him and he may lose countries that have previously announced their support to him."

Abu Saada predicted Abbas would postpone the formation of the unity government until after September.

Such a delay may suit Hamas just fine. In May, upheaval in Syria, which hosts Hamas' political leadership, led the group to push hard for unity with Fatah in case it was forced to leave Damascus. But lately, the pressure appears to have lifted as Syrian President Bashar Assad has deployed heavy force against demonstrators in his country to remain in power.

"To some extent, they have restored their ties with Syria, and their situation is getting better there,'' said Abu Saada.

At the same time, post-revolution Egypt has reopened its border crossing into Gaza, fueling economic growth for the first time in years.

"Hamas is enjoying both power and fortune," Abu Saada said. "These elements could be a reason why Hamas is reluctant to get engaged into more serious negotiations with Fatah on unity."

Both factions have been careful so far to avoid pushing their stalemate to a head, fearing a formal collapse of the deal would trigger a public backlash. Most Palestinians in Gaza and the West Bank strongly support reunification, and some had begun to call for fresh leadership in both factions unless the power struggle was resolved.

"We cannot say that the unity talks with the Fatah movement have reached a deadlock," said Mushir Masri, a Hamas official and member of parliament. "But we cannot also deny that there is an impasse that may foil the efforts that have been made to achieve unity."

Earlier this month, Fatah dispatched its former parliamentary speaker to Gaza in an effort to keep talks alive, but little progress was announced.

Nevertheless, Fatah official Rawhi Fattouh, after meeting with Hamas Prime Minister Ismail Haniyeh, said reconciliation was still possible, promising that "soon, the Palestinian people will hear that we have implemented the unity pact."