An agreement between Fatah and Hamas, Palestinians' rival parties, looks likely on the formation of a unity government with Fatah's flexibility on the future role of Prime Minister Salam Fayyad in the ruling body.

Hamas, which established its own government in Gaza after routing out forces loyal to Fatah in 2007, has been opposed to Fayyad's playing any part in the unity government.

Palestinian President and Fatah leader Mahmoud Abbas said in a speech on Wednesday that he will meet with Hamas Political Bureau Chief Khaled Mashaal in Cairo next Friday to solve the issue regarding Fayyad.

In May, the two Palestinian factions signed an Egypt-brokered reconciliation deal to establish a new government, which would end the division of the Palestinian territories.

"This is the last chance for Hamas and Fatah to reach an agreement and form a Palestinian national coalition government," Prof. Naji Shurab of al-Azhar University in Gaza told Xinhua.

Shurab said he was encouraged by the "positive signs" in Abbas' speech on Wednesday, which promised to make every effort to speed up the process.

Palestinian analyst Hani Al Masri said although the process has been off and on over a long time, he is optimistic about it because there is real progress between Fatah and Hamas.

"They are now talking about a political program. Elections have been set for next May where they will talk about a government without Salam Fayyad. So there is big progress," Al Masri said.

FAYYAD BELONGS TO PEACE TALKS

Al Masri said Hamas' opposition to Fayyad, who was educated in the United States and worked for the International Monetary Fund, is based on his lack of prestige and political differences.

"Fayyad represents the peace process, the Quartet's program, the Road Map, and institution-building ... he belongs to the period of negotiations and the peace process, which is now frozen, " Al Masri argued.

Direct Palestinian-Israeli peace negotiations have been stalled for more than a year after the expiration of Israel's self-imposed freeze on settlement construction in the West Bank.

Abbas demanded a renewal of the moratorium but was refused by Israel, who argued it was a one-time offer and criticized the Palestinian leader for dragging his feet in meeting with Israeli Prime Minister Benjamin Netanyahu for nine months.

OUTSIDE FACTORS

Abbas hasn't confirmed yet whether he will take part in the elections next May, which would be both presidential and parliamentary contests.

Shurab argued that one reason why Abbas is willing to accept a government without Fayyad is that he wants to leave office with national unity in place.

"Abu Mazen wants to leave, but to leave with Palestinian unity because he has lost hope in achieving anything about the peace process," Shurab said, referring to Abbas by his nom due guerre.

Shurab also pointed to a number of regional developments that are affecting the process, including conditions in Syria and the upcoming Egyptian elections.

Hamas' headquarters are located in the Syrian capital of Damascus, and the movement has been criticized by Syrian leadership for failing to support its suppression of a mass uprising.

In Egypt, the Muslim Brotherhood, of which Hamas is an outgrowth, is expected to make a strong show in elections scheduled at the end of this year. The Muslim group's officials have been urging Hamas to make a deal with Fatah.