The Hamas head of the Palestinian government Ismail Haniya said on Friday that he was ready to step down from the premiership to end a crippling Western aid freeze.
Haniya said he did not believe that Western donors would accept any administration he headed, even if his Hamas group was joined in government by the Fatah faction of moderate Palestinian president Mahmud Abbas.
"The United States, the Europeans and others in the region have said that an agreement is a good thing but that they will not lift the siege without replacing prime minister Haniya," he said referring to himself in the third person.
"If we have to choose between the siege and myself, we must lift the siege and end the suffering," he said in a prayer sermon in a Gaza mosque.
Haniya denied that the formation of a national unity government was a "concession" by Hamas after it governed virtually alone since March.
He insisted that the Islamic militant group, which has resisted Western calls to renounce violence and recognise Israel and past peace deals, "would not abandon its people and the Palestinian cause."
Haniya said he expected agreement to be reached on the line-up of a national unity government by the end of the month after he held four rounds of talks with Abbas in Gaza this week.
"The dialogue has made progress, and my meetings with the president yielded results. We have laid the groundwork for forming a national unity government," said Haniya.
"We have reached agreement with the Palestinian groups, between Hamas and Fatah, in order to resume the talks next week. We hope to have good news within two or three weeks."
Mustafa Barghuti, an independent MP who has been mediating between Abbas and Haniya, said late on Thursday that the two leaders had agreed on who should lead the promised national unity government.
They have "solved all problems regarding the name of the prime minister. This is no longer a problem," Barghuti told reporters in the West Bank.
"The announcement of a new cabinet could take place within two weeks but the prime minister may be announced in the coming days," he said.
Hamas spokesman Fawzi Barhum said the two sides were still not ready to announce the new prime minister designate.
"Hamas suggested a candidate. We still cannot talk about an agreement or not. The name will be announced at the right time," he told AFP.
But Abbas's spokesman too put an upbeat complexion on the talks, which had broken off for a month and a half before this week.
"The climate of discussions is very positive," Nabil Abu Rudeina said.
"Contacts and discussions are continuing and I think we are in the final stage of negotiations to reach an agreement on the formation of a unity government."
The moderate Palestinian Authority president held a rare telephone conversation on Thursday with the Hamas movement's supremo, Damascus-based exile Khaled Meshaal.
The European Union has been pressing for the national unity government to be formed as quickly as possible so that the aid freeze can be lifted.
Prime Minister Tony Blair said last week that Britain was "prepared to talk" to a unity government even if Hamas took part, provided it agreed to renounce violence, and recognise Israel and past peace deals.