CAIRO - A Palestinian unity government is on the verge of being agreed, Egyptian President Hosni Mubarak said Saturday after weeks of deadly clashes between rival Hamas and Fatah factions in Gaza.

"We are working toward (the formation of) a national unity government. It is about to be finished, unless there are any surprises," Mubarak said during a joint news conference with German Chancellor Angela Merkel.

Mubarak also said he hoped the matter of an Israeli soldier captured by Gaza militants in June would "soon reach a solution."

"What we have today... is a problem between the Palestinians themselves. It is not possible for the Palestinian side to sit down with the Israeli side as long as there is no agreement between them."

Gunmen loyal to the ruling Islamist Hamas movement have been clashing with followers of president Mahmud Abbas's Fatah faction despite repeated calls for a ceasefire.

Sixty people have been killed since January 25 in the deadliest factional fighting since Hamas won a general election last year.

Merkel, whose nation holds the rotating presidency of the European Union, arrived in Cairo at the start of a regional tour hoping to nudge along the faltering Middle East peace process.

02/03/2007 18:44 GMT

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