The Hamas-controlled Palestinian government will resign within two or three days to make way for a new unity government that could help end a punishing Western aid boycott and resume long-frozen peace talks with Israel, a senior Palestinian negotiator said Friday.

The negotiator took part Thursday in a nighttime meeting in Gaza where Palestinian President Mahmoud Abbas of Fatah and Prime Minister Ismail Haniyeh of Hamas pressed forward with efforts to bring their rival factions together. He spoke on condition of anonymity because the meeting was not public. The two leaders were set to meet again Friday.

Despite the reported progress, Abbas has said he hopes to tie unity efforts to a broader deal that would see Israel release Palestinian prisoners, including several jailed Hamas Cabinet ministers, in return for the release of a captured Israeli soldier. Slow progress on such a deal could delay the creation of the new government.

Formation of a moderate Cabinet to replace the one headed by the militant Islamic Hamas is an important plank in a new peace initiative offered Thursday by France and Spain, aimed at stopping constant Israel-Palestinian violence and moving toward peace negotiations.

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The concept is to replace the Cabinet of Hamas ministers with independent experts linked to, but not members of, the two movements. Abbas and his Palestine Liberation Organization would be charged with handling peace negotiations, while the Cabinet would deal with the daily affairs of the Palestinian areas.

The sides have already agreed in principle on a compromise candidate for prime minister: Mohammed Shabir, 60, a U.S.-educated microbiologist with ties to both Hamas and Fatah. At Thursday's meeting, Abbas assured Haniyeh that Shabir enjoyed broad international acceptance, the negotiator said.

The object is to satisfy Western demands for a Palestinian leadership that recognizes Israel, renounces violence and accepts previous peace deals. At stake is vital foreign aid — hundreds of millions of dollars a year that have kept the Palestinian Authority afloat for the past decade. The West cut off the aid in March, when Hamas took office after sweeping Fatah in a parliamentary election.

Israel, for its part, signaled that it would not undertake a large-scale military operation in Gaza in response to daily rocket salvos by Gaza militants at Israeli towns and villages. A rocket killed a women in the town of Sderot on Tuesday.

Those calling for a broad, crushing offensive "need to remember that the terrorism will never end altogether," the Haaretz newspaper Web site quoted Israeli Prime Minister Ehud Olmert as telling reporters on Thursday during his return flight from a five-day trip to the U.S.

"This war (against rocket fire) will not be over in one blow," he said.

Israeli restraint could benefit the new European peace plan, emerging from the Gaza bloodshed — the unceasing rocket attacks and Israeli counterstrikes. Late Thursday and early Friday, Israeli warplanes blasted several houses in Gaza after warning their residents to leave, Palestinians said. Israel said the houses were used for weapons.

"We cannot remain impassive in the face of the horror that continues to unfold before our eyes," Spanish Prime Minister Jose Luis Rodriguez Zapatero declared as he and French President Jacques Chirac presented the plan.

But Israel strongly opposed the plan, insisting on direct negotiations and rejecting international peace conferences or mediators. "These are Spanish ideas, not coordinated with the European Union or with Israel," said Amira Oron, a Foreign Ministry spokeswoman. "Israel believes that it is right to conduct direct negotiations with all sides of the conflict."

The Spanish plan has five parts: an immediate cease-fire, a Palestinian unity government that can gain international recognition, an exchange of prisoners — including the Israeli soldiers whose capture sparked the war in Lebanon and fighting in Gaza this summer — talks between Abbas and Olmert and an international mission in Gaza to monitor the truce.

Palestinian negotiator Saeb Erekat, who is close to Abbas, said any international peace initiative was welcome, but he stopped short of a warm endorsement of the new one.

"We don't need to reinvent the wheel, we don't need a new initiative. What we need is a mechanism for implementation and timelines," he said.