Rival Palestinian groups, Fatah and Hamas have signed a reconciliation agreement, which could lead to the formation of a unity government in the West Bank and Gaza.

Mahmoud Abbas, the leader of the Fatah movement and president of the Palestinian Authority met with Khaled Mishaal of Hamas in Cairo on 5 May, their first meeting in five years along with representatives from the UN, European Union and Cairo-based Arab League.

The deal provides for the creation of a joint caretaker government before elections in Gaza and the West Bank in 2012.

Two previous agreements have been signed since Hamas won legislative elections in 2006, but both were short lived. The first was signed in Mecca in 2007, but lasted only three months before Hamas took complete control of Gaza by force. The second deal was signed in Yemen only a year later, but was short lived, lasting barely two days.

Israel signed the 1993 Oslo agreement with the Palestinian Liberation Organisation, then under the leadership of Yassir Arafat, but views Hamas as a terrorist organisation committed to its destruction.

Israeli Prime Minister Binyamin Netanyahu called the accord as “a tremendous blow to peace and a great victory for terrorism”.

Netanyahu has been in the UK, lobbying for the EU and the US to cut aid to the Palestinian Authority if Hamas joins a new unity government.