Palestinian Authority Prime Minister Salam Fayyad has been and remains PA President Mahmoud Abbas' candidate for prime minister in a unity government with Hamas, Fatah parliament member Faisal Abu Shahla said on Wednesday.

Abu Shahla added, however, that the matter will only be decided when Abbas meets with Hamas leader Khaled Meshal in Cairo next Friday.

On Tuesday, Palestinian sources said that Fatah and Hamas agreed to hold elections next May and are due to establish a caretaker government in the coming weeks which will exclude Fayyad.

According to Palestinian sources, a breakthrough in Egyptian mediation efforts occurred in recent days, ahead of the Abbas-Meshal meeting expected to take place next Friday.

The Fatah-Hamas agreement came to fruition after the committee appointed by the United Nations Security Council to investigate the Palestinians' membership request said the Palestinian Authority did not fulfill the necessary requirements since it did not control the Gaza Strip.

The new agreement is expected to unite the two governments and aid the PA in gaining a majority in the Security Council. Abbas' refusal to replace Fayyad was one of the major obstacles to carrying out the reconciliation agreement achieved six months ago.

Azzam Ahmad, a senior Abbas aide, told Palestinian reporters this week that Fatah has decided to present a replacement to the prime minister.

Fayyad himself said Monday he would not stand in the way of an agreement. "I have always called for ending the split," he said. "I call upon the factions to find a new prime minister and stop claiming that I'm the obstacle, because I was never an obstacle and will never be."

Even if an agreement is reached in Cairo, implementing it is far from certain. The sides will still have to agree on a list of ministers in the new government, budget issues and how to combine rival security forces.

Any government that includes Hamas would also be shunned by Israel and the West, which have both branded the group a terrorist organization.