Israel said Monday it will consider releasing millions of dollars in tax rebates to the Palestinians and freeing Palestinian prisoners if the Palestinian government curbs its hardline views against Israeli sovereignty.

Palestinian Chairman Mahmoud Abbas, leader of the moderate Fatah Party, has been trying to persuade the ruling Hamas faction to curb its anti-Israeli views through the formation of a national unity government.

Talks on the unity government have stalled in recent days, with the United States signaling it would not deal with a Hamas-Fatah coalition unless it states clearly that it recognizes Israel, renounces violence and accepts existing peace agreements.

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If Hamas softens its position and an Israeli soldier captured in June by Hamas-allied militants is released, Israel would release prisoners and transfer millions of dollars in tax rebates frozen after Hamas came to power, said Israeli Ministry spokesman Mark Regev.

"If they do that, then the Israeli commitment is to immediately follow through with substantial confidence building measures that would reinforce a positive momentum," Regev said.

Israel is hopeful that during the meeting between Foreign Minister Tzipi Livni and Abbas in New York later on Monday, Abbas will report that Hamas is indeed willing to curb its views.

"For us the meeting is important," Regev said. "We don't want to see stagnation."