Hamas says in talks with Abbas on new government

DAMASCUS (Reuters) - President Mahmoud Abbas and Hamas are in fresh talks on a Palestinian government, but the Islamist group now insists that Prime Minister Ismail Haniyeh must keep his post, Hamas's exiled leader said on Wednesday.

Hamas, which leads the Palestinian government, and Abbas's Fatah are locked in a deadly power struggle in Gaza which has raised fears of a civil war.

"There are dialogues that are going on between us and Fatah and Abu Mazen (Abbas)...True that in the past there were failures in dialogue but we as Palestinians have no option but dialogue," Khaled Meshaal told Reuters in an interview in Damascus.

"There are chances for the success of the dialogue..."

Efforts to form a new government late last year failed after talks between Abbas and Hamas broke down over the composition and policies of a new cabinet to be made up of technocrats.

The Palestinian president's chief of staff Rafiq Husseini told reporters in the West Bank town of Ramallah that Abbas would allow two weeks for renewed dialogue on a national unity government that is due to begin next week.

The president has given a period of only two weeks for a national dialogue ... after those two weeks we will either come to agreement or not," Husseini said.

Differences between the two main Palestinian groups have widened since last year's failure to get a unity government deal and threatened to spill over into an all out war in Gaza.

"Now we are seeking the establishment of a government of national unity in which various factions and parliamentary blocs will be represented...," he said, adding that Hamas was insisting Haniyeh stays on in any new government.

Meshaal gave few other details.

The Palestinians have been in turmoil since Hamas won a general election a year ago. Israel and Western countries have imposed financial sanctions on the Hamas-led government for refusing to recognize Israel, renounce violence and accept past peace accords.

OUTSIDE INFLUENCE

Several Palestinians have been killed over the past month in sporadic fighting between Hamas and Fatah gunmen in Gaza.

Meshaal said U.S. and Israeli interference was stoking tensions among Palestinian factions. The United States announced this month that it is planning to spend more than $80 million to arm and train forces loyal to Abbas.

"This external intervention in the internal Palestinian affairs is pouring fuel on the fire and pushing the political differences to feed conflict and internal struggle," Meshaal said.

He said foreign sanctions and demands that any Palestinian government recognize Israel would not defeat Hamas: "These sanctions lost their effectiveness in subjugating Hamas or the Palestinian people.

"I say that this situation will not continue. Now or tomorrow sanctions must end. The bet that the sanctions would defeat Hamas will not pay off," he said.

The Hamas leader said Abbas's call for early elections last month was "an illegal and illegitimate step" that would not happen. He said the Palestinian President had no authority to dissolve the legislative council.

"I think Abu Mazen knows that. If he insists on this step it means that he wants to detonate the Palestinian situation," Meshaal warned.

(Additional reporting by Sean Maguire and Khaled Yacoub Oweis)