A senior Hamas official on Tuesday said the Islamist group would refuse to allow the exile of prisoners released in the deal to free abducted Israel Defense Forces soldier Gilad Shalit.

"Hamas cannot agree that the deal will include the principle of exile," said Osama Hamdan, Hamas' chief representative and senior leader in Lebanon.

Shalit was kidnapped by Gaza militants in a 2006 cross-border raid, and Hamas is demanding the release of hundreds of prisoners in exchange for his freedom.

Hamdan's comments come despite the fact that Hamas has previously agreed to have some prisoners deported outside of the Palestinian territories.

"We strongly insist that all prisoners be released to their homes and families," Hamdan added, saying that reports in Israel that prisoners would be exiled are an attempt to weaken Hamas' position in negotiations.

During discussions on the prisoner exchange deal with the forum of top cabinet ministers, Prime Minister Benjamin Netanyahu this week said, "I am willing to go far in the Shalit deal, but I will not give up [and cross] my red lines, the most important one being releasing terrorists to the West Bank."

Hamdan's comments also come after Hamas politburo chief Khaled Meshal said Monday that his organization insists that the list of prisoners freed also include Israeli Arabs and other prisoners accused of terror attacks, some of which killed dozens.

Report: Netanyahu hopes to blame Hamas for failure of deal

Israeli officials who support the prisoner exchange deal with Hamas to free abducted Israel Defense Forces soldier Gilad Shalit are concerned that Prime Minister Benjamin Netanyahu does not want the swap to be executed, Fox News reported on Tuesday.

"Bibi [Benjamin Netanyahu] hopes to blame Hamas for the failure of the deal. But we will do our utmost to make the deal happen," one senior Israeli official was quoted as telling Fox News.

The officials said Netanyahu made changes to the deal regarding the destination to which Palestinian prisoners would be released in order to have Hamas refuse the swap, Fox reported.

Mark Regev, the Prime Minister's spokesman, dismissed the statement as, "just speculation."

Israel would like to see most of the Palestinian prisoners from the West Bank, especially those considered the most dangerous, expelled to the Gaza Strip or abroad.

Report: German mediator to arrive in Gaza Wednesday

Meanwhile, a Hamas official said Tuesday that the German mediator brokering a deal for the release of Gilad Shalit will only arrive in the Gaza Strip on Wednesday, as Israel is seeking to modify its response to the proposed prisoner swap.

Hours earlier, the group confirmed that it had received Israel's position on the deal, but later said that Jerusalem wanted to make adjustments and asked the mediator to postpone his visit.

Defense Minister Ehud Barak earlier Tuesday said that Shalit's release is Israel's top priority, but stressed that the government would not pay "any cost" to Hamas in a prisoner exchange deal.

"The government of Israel and the defense establishment are working hard and intensively to find the right way to make progress in the Shalit affair," Barak said, hours after a forum of seven top ministers concluded its deliberations over the deal offered by Hamas.

"Our top priority, according to both ethics and authority, is to bring Gilad home," the defense minister added. "Not at any cost, but in every possible and appropriate way."

Israel gave the German mediator its response late Monday, after senior cabinet ministers held marathon talks at Netanyahu's office.

The forum of seven convened after nightfall Monday for the fifth consecutive meeting on the issue over the last two days in a frenzy of activity that suggested a deal could be close.

The group was divided, however, with some ministers opposed freeing Palestinians convicted in fatal attacks, arguing they could kill again.

After more than four hours of talks, Netanyahu's office released a statement saying only that instructions were given to the negotiating team about the continuation of efforts to bring Shalit home safe and sound.

The forum of seven deals with sensitive security affairs, and is made up of Netanyahu (Likud); Barak (Labor); Foreign Minister Avigdor Lieberman (Yisrael Beiteinu); Minister without Portfolio Benny Begin (Likud); Minister of Strategic Affairs Moshe Ya'alon (Likud); Interior Minister Eli Yishai (Shas); and Minister of Intelligence and Atomic Energy Dan Meridor (Likud).

The Hamas government was scheduled to hold its weekly meeting later Tuesday, and the deal was likely on the agenda, said a group official.

The Shalit family returned to its home in Mitzpeh Hila late Monday. A member of the campaign for Shalit's release said that Netanyahu's instructions to continue negotiations "indicates progress. The family and the campaign still hope the prime minister will make the decision to see Gilad Shalit freed as soon as possible."

Netanyahu: Ashkenazi is concerned about Israel's security

Netanyahu on Tuesday, meanwhile, condemned a scathing remark made by a senior official in his bureau regarding the Israel Defense Forces chief of staff.

A senior government official said on Tuesday that Netanyahu's National Security Adviser Uzi Arad was the official who attacked IDF chief Gabi Ashkenazi, and added that the dispute harmed the discussion about the swap among senior cabinet ministers.

"The information Uzi Arad leaked to the media and his attack on the IDF chief harmed the forum's discussions as well as the negotiations to strike a deal for Shalit's release," said the official who particiapted in the deliberations.

Arad is considered by several ministers as the highest ranking officer to criticize Ashkenazi over his support of the deal, which entails the release of hundreds of Palestinian prisoners detained in Israeli prisons.

The unnamed official was quoted in Israeli media on Tuesday saying that Ashkenazi was behaving like "the chairman of soldiers' parents association" during deliberations over a deal for the release of Shalit.

Netanyahu emphasized in a special statement released on Tuesday that he appreciates Ashkenazi's efforts at leading the IDF, as well as the latter's desire to see Shalit returned home alive and well.

"The IDF Chief's stance reflects clearly and wholly a concern for Israel's security," said Netanyahu.

Defense Minister Barak issued a similar response, saying that the IDF chief's stance on the Shalit matter is in line with that of the defense establishment.