Rival Palestinian factions Fatah and Hamas have signed a landmark reconciliation pact, ending a four-year rift that had divided the territory envisioned for a future Palestinian state. The deal plunged Israeli-Palestinian peacemaking deeper into uncertainty as Prime Minister Benjamin Netanyahu called it a “mortal blow to peace.”

The agreement, which followed years of bitter acrimony between the two Palestinian movements, was made possible in large measure by the political changes sweeping the Arab world and the deadlock in U.S.-brokered peace talks with Israel.

A unity government foreseen by the accord would also allow the Palestinians to speak with a single voice if they go ahead with plans to ask the United Nations to recognize Palestine as a state during the annual General Assembly session in September.

With Wednesday’s signing, Palestinian President Mahmoud Abbas, whose Palestinian Authority governs the West Bank, joined forces with Khaled Mashaal, the Syrian-based head of Hamas, which rejects Israel’s existence and is backed by Iran.

The alliance set off ecstatic celebrations in the Palestinian territories — and warnings from both the Obama administration and international mediator Tony Blair that the new Palestinian government must recognize Israel or risk international isolation.

Abbas brushed off the criticism and instead used the occasion to deliver a scathing attack on Israel, saying “We reject blackmail and it is no longer possible for us to accept the (Israeli) occupation of Palestinian land.”

Both Palestinian leaders emphasized a united Palestinian direction, with Mashaal declaring the pact means the Palestinians will have “one leadership, one decision.”

“The common national goal is to establish a Palestinian state, independent with sovereignty on the West Bank and Gaza Strip with Jerusalem as the capital, without settlements, without giving up a single inch of it and with the right of return” of Palestinian refugees, the Hamas leader said.

Netanyahu denounced the new Palestinian alliance as “a mortal blow to peace and a big prize for terrorism.”

“Israel continues to want peace and seek peace but we can only achieve that with our neighbors that want peace,” the Israeli leader said. “Those of our neighbors that seek the destruction of Israel and use terrorism are not partners to peace.”

The Palestinians have been torn between rival governments since a previous unity arrangement collapsed into civil war in June 2007. In five days of fighting, Hamas overran the Gaza Strip, leaving Abbas’ Palestinian Authority in charge of the West Bank. Reconciliation is essential for Palestinian dreams to establish a state in the two areas.

Wednesday’s pact provides for the creation of a joint Palestinian caretaker government ahead of national elections next year. But it leaves key issues unresolved, such as who will lead the government or control the competing Palestinian security forces, and makes no mention of relations with Israel.

In his speech, Abbas rejected Israel’s opposition to the pact, saying the reconciliation with Hamas was an internal Palestinian affair.

“They are our brothers and family. We may differ, and we often do, but we still arrive at a minimum level of understanding,” he said.

Abbas said Israel cannot continue to act as “a state above the law” and called for an end to construction in Jewish settlements on lands the Palestinians want for a future state.

“Mr. Netanyahu, you must choose between settlements and peace,” he said.

It’s not clear whether Western powers would deal with the new government that is to emerge from the unity deal. So far, they’ve said they are waiting to see its composition.

In Washington, State Department spokesman Mark Toner said it was important that Palestinians ensure that their agreement is implemented “in a way that advances the prospects of peace rather than undermines them.”

He said the U.S. was still waiting to see what the agreement actually means in practical terms, but stressed Hamas’ inclusion in the government must be accompanied by recognition of the state of Israel, a commitment to nonviolence and acceptance of previous agreements.

“If Hamas wants to play a meaningful role in the political process there, and indeed in the peace process, they need to adhere to these principles,” Toner said.

Blair agreed. “I think the central question people ask is, ‘Does this mean a change of heart on behalf of Hamas or not?’” he told The Associated Press.

Unlike Fatah, which has negotiated several partial peace accords with Israel, Hamas does not accept a place for a Jewish state in an Islamic Mideast, though leaders like Mashaal say they would accept a Palestinian state in the West Bank and Gaza as an interim step.

Hamas, which is considered a terror group by Israel, the U.S. and European Union, has sent dozens of suicide bombers into Israel, killing hundreds, and thousands of rockets have been fired from Gaza at Israel, many by Hamas. Israel has retaliated with strikes into Gaza that have killed dozens of Palestinian civilians.

The Quartet of Mideast mediators {hbox}” the U.S., the EU, the United Nations and Russia {hbox}” has long demanded that Hamas renounce violence and recognize the principle of Israel’s right to exist. Hamas’ continued refusal to accept these conditions could jeopardize hundreds of millions of dollars in international aid.

Palestinian political activist Mustafa Barghouti said Hamas, by signing the accord, “showed a sign of moderation.”

“I hope the United States starts seeing the situation not through Israeli eyes. I hope the United States can have its own independent policy,” he said.

Reservations over key differences between the two sides linger, and Palestinian leaders had a brief dispute ahead of Wednesday’s signing ceremony when Mashaal objected to being seated in the front row rather than on the podium along with Abbas, the Egyptian foreign minister and intelligence chief.

He grudgingly accepted his seat and the atmosphere remained generally upbeat, with many among those present saying they saw the deal as a by-product of the political changes sweeping the Arab world.

Uprisings toppled or weakened some of the leaders who had patronized Hamas and Fatah, and angry Palestinians, inspired by Arab youth movements in Egypt, Syria and elsewhere, had begun to take to the streets to demand an end to the Fatah-Hamas rift.

“The general atmosphere in the region imposed a different reality,” said Cairo-based Mohammed Sobeih, the Arab League official handling Palestinian affairs. “Everybody believed that the continuation of the division is dangerous, destructive and none will be able to bear it any longer.”

Syria, long Hamas’ traditional Arab backer and home to several of its top leaders, has been rocked in recent weeks by a wave of protests demanding the ouster of President Bashar Assad. Similarly, the regime of former Egyptian president Hosni Mubarak, Fatah’s main backer, collapsed in February after an 18—day uprising.

Ahmed Abdel-Rahman, a spokesman for Abbas, said Syria had always been the decision-maker for Hamas. “There was a Syrian veto, but now it doesn’t exist,” he said.

Samir Ghattas, head of the Cairo-based Maqdus Center for Strategic Studies, suggested that Syria’s weakened leadership may no longer feel it prudent to doggedly maintain its close ties with Hamas.

Palestinian businessman Munib al-Masri, head of an independent political bloc, said Mubarak’s personal enmity toward Hamas was a major barrier to unifying the Palestinian rivals.

After Mubarak’s ouster, al-Masri helped arrange for Fatah and Hamas delegations to meet with new Egyptian officials in the foreign ministry and intelligence service, leading to Wednesday’s accord.

“The youth in the streets brought awakening, a spring and a revival,” al-Masri said.

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