Reports of progress on a prisoner exchange deal between Israel and Hamas have led to high expectations in the Palestinian Authority as well, as sources say they hope this means past understandings between Israel and the PA will also be realized with the deal's execution.

According to sources, Israel has in the past agreed to release a number of Palestinian prisoners as a goodwill gesture to President Mahmoud Abbas as the deal for the release of captive solder Gilad Shalit nears completion.

Palestinian sources told Ynet that during talks with former Prime Minister Ehud Olmert's government, it was agreed that if and when a deal is sealed, Israel will also release hundreds of prisoners with the purpose of boosting Abbas' standing.

This move is meant to prevent Hamas from gaining excessive popularity in the Palestinian street by taking credit for the release of over 1,000 prisoners, 450 of which are considered 'hardcore'.

"The idea surfaced during the time of the Olmert government, and there is room for its implementation if the reports of progress on a deal are true," a source said.

"Leaving the PA behind will strengthen the position of those that believe prisoners, especially hardcore prisoners, can be released only by abductions," he added.

According to the source, heads of the Israeli defense establishment were aware of this understanding at the time, and there is therefore nothing preventing its implementation - not even the change of leadership in Jerusalem.

Wednesday night Hamas-affiliated reporter Mustafa Sawaf said the Shalit deal is about to be finalized.

"The recent numerous visits to Egypt conducted by political and military Hamas leaders, as well as the entrance into the game by the German negotiator, suggest that the Shalit deal is on its way to completion," Mustafa Sawaf wrote.

Meanwhile, an state official accompanying Prime Minister Benjamin Netanyahu, who is currently in Germany, said Wednesday that "Germany carries a lot of weight in the attempts to advance the release of Gilad Shalit, and we welcome this involvement."