The Palestinians' rival leaders have quietly decided to keep their respective governments in the West Bank and Gaza in place until elections, a senior Hamas figure told The Associated Press. This proposal would remove a major obstacle to efforts to reconcile the factions: the need to form an interim unity government.

A representative of Hamas' rival, Palestinian President Mahmoud Abbas, denied however that such a deal was struck.

The understanding was reached between Western-backed Abbas and Khaled Meshal, chief of the Islamic militant Hamas, during one-on-one talks last week, said the Hamas figure.

He spoke on condition of anonymity, because he said the two leaders decided not to make the arrangement public.

Another top Hamas official, Moussa Abu Marzouk said that it was at least possible to skip an interim government and head straight to elections, tentatively scheduled for May.

However, Abbas envoy Azzam al-Ahmed on Saturday denied the two leaders reached such an understanding. "There is no possibility of holding elections without a unity government," he said.

Keeping the existing governments in place would help Abbas avoid a Western backlash in the run-up to elections. Western powers fear a unity government, even one composed of technocrats without clear political affiliation, would be heavily influenced by the Islamic militant Hamas.

It also would mean that Salam Fayyad, an internationally respected economist, remains in charge in the West Bank for the time being and continue to ensure that donor countries keep funding Abbas' Palestinian Authority. Hamas will keep running Gaza, the territory it seized from Abbas by force in 2007.

Shelving the unity government would also remove a major sticking point in Hamas-Abbas negotiations. The unity deal, approved in principle in May, has stalled in part over who should lead the interim unity government. Hamas adamantly opposed Abbas' preference for appointing Fayyad, arguing he is too close to the West.

At Thursday's meeting, Abbas told Meshal that that the two-government status quo was "convenient for both sides and any change might be costly," according to the Hamas figure. The Hamas figure said he was briefed by Meshal, who welcomed the idea.

Al-Ahmed, the Abbas envoy, said negotiators from both sides would meet again next month to try to form a unity government. Abu Marzouk confirmed that such talks are planned.