CAIRO - Palestinian officials said on Tuesday they would be ready to unveil a new unity government at a meeting between Palestinian President and Fatah leader Mahmoud Abbas and Hamas leader Khaled Meshaal in Cairo next week.

Leaders from the two factions met for several hours in Cairo on Tuesday to discuss forming the new government, which Palestinians see as crucial for efforts to seek statehood in September.

Palestinian officials said the talks, headed by Fatah Central Committee member Azzam al-Ahmed and Hamas's deputy politburo head Mousa Abu Marzook, agreed on the release of prisoners held by the two factions and made progress on forming a new government, but had yet to agree on a prime minister.

"The prime minister's name and those of the ministers will be announced before the people on Tuesday (next week)," Meshaal's deputy, Mousa Abu Marzook, told Reuters in an interview.

He said Abbas and Meshaal would be in Cairo to announce the new government.

Under a reconciliation accord reached in April, the rival factions agreed to form a government of technocrats, consisting of ministers without party affiliations, to prepare for general elections within a year.

Fatah nominated Salam Fayyad, an internationally respected former World Bank economist who heads the Palestinian government in the West Bank city of Ramallah, for the post of prime minister, but Hamas rejected Fayyad's nomination.

Fayyad supporters say his standing abroad was an asset for the Palestinians in ensuring the continued flow of international aid and in pursuing a bid for UN recognition of Palestinian statehood, expected in September.   

Israel objects

Israel has said the reconciliation accord, brokered in secrecy by Egypt, would not secure peace in the Middle East and urged Abbas to carry on shunning Hamas.

Hamas, an Islamist movement, won Palestinian elections in 2006 but Fatah continued to control the West Bank while Hamas beat Fatah in a brief civil war in the Gaza Strip in 2007 and has governed Gaza since then.

The United States has criticised the accord but said it would look at the composition of the new government.

Al-Ahmed declined to say why Hamas had rejected Fayyad's nomination but said the subject had been discussed thoroughly.

"We had already agreed that the government will be formed by consensus. We have discussed this subject thoroughly and in a practical manner," he said.

"Thus, we decided to continue next Tuesday and with the participation of Abbas and Meshaal," he added.

Abu Marzook said problems facing the establishment of the new government were that the Palestinian Authority was dependent on foreign aid, and that the new government must be acceptable to different powers.

"The United States is putting its conditions and Europe wants to wait to see the government (before it will) announce its position ... and this is the difficulty," he said.