The Palestinians' rival leaders have quietly decided to keep their respective governments in the West Bank and Gaza in place until elections, a senior Hamas figure told The Associated Press. This proposal would remove a major obstacle to efforts to reconcile the factions: the need to form an interim unity government.

A representative of Hamas' rival, Palestinian President Mahmoud Abbas, denied that such a deal was struck. Abbas envoy Azzam al-Ahmed insisted there was no agreement and "no possibility of holding elections without a unity government."

The Hamas figure said the understanding was reached between Western-backed Abbas and Khaled Mashaal, chief of the Islamic militant Hamas, during one-on-one talks last week. He spoke on condition of anonymity, because he said the two leaders decided not to make the arrangement public.

Another top Hamas official, Moussa Abu Marzouk, said that it was at least possible to skip an interim government and head straight to elections, tentatively scheduled for May.

The Hamas statements suggested that a solution was being finessed to get around the disagreement over keeping Salam Fayyad, prime minister of the West Bank government, who is popular with Western donors but strongly opposed by Hamas. By retaining the separate governments until the elections and perhaps enabling them to work closer together, both sides could save face.

Keeping the existing governments in place would help Abbas avoid a Western backlash and continue the flow of international aid to his government in the run-up to elections. Western powers fear a unity government, even one composed of technocrats without clear political affiliations, would be heavily influenced by the Islamic militant Hamas.

It also would mean that Salam Fayyad, an internationally respected economist, remains in charge in the West Bank for the time being and continue to ensure that donor countries keep funding Abbas' Palestinian Authority. Hamas will keep running Gaza, the territory it seized from Abbas by force in 2007. The Hamas government is not internationally recognized.

Shelving the unity government step would also remove a major sticking point in Hamas-Abbas negotiations.

At Thursday's meeting, Abbas told Mashaal that that the two-government status quo was "convenient for both sides and any change might be costly," according to the Hamas figure. The Hamas figure said he was briefed by Mashaal, who welcomed the idea.

Al-Ahmed, the Abbas envoy, said negotiators from both sides would meet again next month to try to form a unity government. Abu Marzouk confirmed that such talks are planned.