After months of playing defense against a Palestinian campaign for international recognition of statehood, Prime Minister Benjamin Netanyahu may now have a new line of attack.

The Palestinian reconciliation deal announced in Cairo yesterday would pave the way for a unity government between Palestinian Authority President Mahmoud Abbas's Fatah party and Hamas, considered a terrorist group by Israel, the US, and the European Union.

The prospect of a Hamas-Fatah government allows Mr. Netanyahu to argue that the international community shouldn’t give its blessing to a state run at least in part by a terrorist group that doesn’t recognize past peace accords – or even Israel itself. But he faces a challenge: the West sees reconciliation between Fatah and Hamas as a prerequisite for peace and sometimes portrays Israel as obstructionist for taking firm stances on issues like settlement expansion.

Top 5 issues on the table for Israeli-Palestinian talks

"The PLO-Hamas rapprochement will be a boost for Netanyahu – albeit in the short term. He can say that [Palestinian President Mahmoud] Abbas is now in with a group that doesn’t recognize Israel’s right to exist," says Meir Javedanfar, a Middle East analyst based in Tel Aviv. "Israel is going to be forced to show compromises due to the higher credibility which the international community seems to be giving to the Palestinian side, especially the PLO under Abbas."
Palestinians' united front

The Palestinian accord is seen as a gambit by Mr. Abbas to close ranks with Fatah's main rival before appealing to the United Nations in September for statehood recognition, making their argument more compelling to those who question conferring statehood to an entity under divided rule.

The European Union issued a lukewarm response Thursday to the Palestinian announcement, saying that it wants to "study the details" of the reconciliation deal to form a powersharing government with Hamas and hold elections within a year.

When Netanyahu visits London and Paris in the coming weeks, he will undoubtedly seek to deepen European skepticism by arguing that Hamas has not moderated itself since it won elections in 2006 and violently ousted Fatah from Gaza the following year. Recognizing Palestinian statehood when Hamas is at the helm could be dangerous, he is likely to argue.

"It will be easier now for Israel to block a unilateral Palestinian state, since the West will find it difficult to accept a state in which Hamas, as an active terror organization, is a key element," wrote Guy Bechor, a Middle East analyst, who adds that the deal could also make Abbas appear as less willing or able to maintain peace. "This agreement reveals Abu Mazen’s 'peace intentions,' even before there is a state. It proves what this entity will look like, even before it has arisen. This is a precious gift for our diplomacy."

But on the flip side, the Europeans "really want to negotiate with Hamas," says Shimon Shiffer, a commentator for the Israeli newspaper Yediot Ahronot. "Even in Israel there are those who think we should look around and look for channels to Hamas. They are not going to disappear."

Would unity government negotiate with Israel?

The deal, announced last night and due to be signed in the coming few days, calls for an interim government before elections can be held within a year for a new parliament and a new president. Hamas will continue to control Gaza and Fatah will rule the West Bank, continuing the status quo since their split in 2007. Observers have cautioned that the thorniest points of dispute between the two remain unresolved.

Netanyahu will assail a unity accord as giving Hamas and opportunity to expand from Gaza to the West Bank with an ideology opposing Israel’s existence. On Wednesday he pressed the Palestinian Authority to choose between peace with Israel or Hamas.

On Thursday, Israeli President Shimon Peres backed that up, calling the reconciliation a "façade" that would not bring peace.

Mr. Abbas responded that he would continue to push for peace negotiations even during a powersharing partnership with Hamas, and that Fatah would take the lead role in peace talks. Prominent Hamas leader Mahmoud Al-Zahar, however, said a transitional government wouldn’t negotiate with Israel. And Israel's inner security cabinet decided today that Israel will not negotiate with a Hamas-Fatah unity government.

The accord is also likely to figure prominently as a target in Netanyahu’s speech in May before a joint session of the US Congress. He is expected to unveil an Israeli peace initiative that would serve as a carrot for the Palestinians to abandon a drive for UN recognition in September and return to the peace table.

Should Abbas choose to accept, Netanyahu could press Abbas to get Hamas to renounce violence and accept Israel, says Mr. Shiffer. But the reconciliation deal with Hamas is likely to cause a deterioration in the already strained ties between Israel and the Palestinian Authority (PA).

One Israeli cabinet minister said in an interview with Israel Radio that in the event of a unity government, Israel would have to stop security cooperation with the PA in the West Bank, which Israeli military officers have credited with the drastic reduction in attacks against Israelis in recent years.