The West has no option but to recognize a Palestinian unity government whose details are being worked out between Hamas and Fatah, Hamas leader Khaled Meshal said on Monday.

"This is an opportunity for the international community to correct its mistake. Some of its members did not respect the will of the Palestinian electorate. They now have to learn and respect Palestinian consensus," Meshal said,

"The atmosphere with Fatah is positive. We want to tell the world we form one Palestinian line and the siege has to be lifted. The international community has no option but to respect Palestinian will," Meshal said after a late night meeting with Ahmad Qureia, a high level Fatah member.

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Palestinian Authority Chairman Mahmoud Abbas sent Qureia to Damascus to resolve issues preventing the formation of a new government.

A main point to be worked out is guarantees Hamas seeks through Abbas for the West to recognizes the new administration and lift sanctions that are contributing to an economic crisis in Gaza and the West Bank.

Qureia, who is due to meet Syrian President Bashar al-Assad later on Monday, was in Damascus in September. Feuding with Hamas then prevented him from meeting Meshal.

Syria, historically at odds with Fatah, hosts exiled members of Hamas. Diplomats say the Baathist government has stepped up backstage diplomacy to cajole Hamas into easing its grip on power in a bid to undercut Israeli attempts to paralyze the Islamist group.

Meshal said negotiations with Fatah have come a long way.

"We are discussing all details regarding the next administration, but we have nothing to gain by revealing them now. The atmosphere with Fatah is positive and this meeting is an indicator," Meshal said.

The Islamist movement defeated Abbas' Fatah faction in January's Palestinian elections and formed a government in March that has been under Western sanctions. Washington, Israel's chief ally, says any new government must accept to recognize the Jewish state, renounce violence and accept prior peace accords.

Hamas refuses to recognize Israel and end its armed struggle, saying such moves would be futile as long as Israel shows no sign of relinquishing all occupied land and keeps expanding settlements in the West Bank.

Palestinian politicians say a way around the recognition issue is for Hamas to enter into the Palestinian Liberation Organization, which signed peace accords with Israel although it includes factions that do not recognize it.

Meshal said a meeting between Hamas and Fatah in Damascus is being prepared to discuss re-organising the PLO as a step for Hamas to enter the organization.

"There is a newfound understanding," Meshal said. "We hope it will result in the announcement soon of a Palestinian unity government and serious steps to rebuild the PLO."

Palestinian Prime Minister Ismail Haniyeh said Sunday the participation of Hamas in a Palestinian unity government hinges on winning guarantees Western economic sanctions would end once the new administration was in place.

"We need documentation and we need a greater assurance. We need to feel that they will be committed to lifting the siege in return for this big step," Haniyeh told reporters.

"We are not going only for a photo opportunity. We want to lay the basis for real national unity, for a real political partnership," Haniyeh said.

"Therefore, the United States, the Europeans and our brothers the Arabs must shoulder their full responsibility to end the siege of the Palestinian people," he said, repeating a demand for Israel to free Palestinian prisoners and jailed Hamas legislators.

Haniyeh said Hamas and Fatah were engaged in "deep and continuing dialogue" and that more time was needed before a unity government of technocrats could be finalized.

He expressed disappointment that a promise a week ago by Arab foreign ministers to break a Western ban on bank transfers to the PA has not yet been implemented.

At their meeting in Cairo, the ministers gave no details of how they would help banks avoid U.S. sanctions to send between USD 100 million and 150 million in outstanding Arab aid pledges to the Palestinians.

"We appreciated the decision and we regarded it as a distinctive step to end the siege, but it was not translated on ground," Haniyeh said. "The Arabs backtracked in the face of American might."