A source in Jerusalem said Saturday Israel is in favor of Hamas' declared intention of cutting economic ties between Gaza and Israel.

"This is excellent," the source said. "It is what Israel has desired for years, and it is only good for us."

The political source added: "If Egypt agrees to the process, Israel will give it its blessing."

Hamas' deposed prime minister Ismail Haniyeh was quoted Saturday as saying that Gaza must forge stronger economic ties with Egypt as a way of disconnecting from Israel.

Haniyeh told the pro-Hamas daily Palestine in an interview published Saturday that Hamas would like to see Gaza's economy cut its ties with Israel, and instead receive fuel and electricity from Egypt.

"We have said from the days of our election campaign that we want to move toward economic disengagement from the Israeli occupation," Haniyeh said.

Egypt has a greater ability to meet the needs of Gaza, he added.

The Hamas leader was also quoted as telling the daily on Friday as saying he would not allow the border to be resealed. "The Palestinian people have many options."

Meanwhile, senior Hamas hardliner Mahmoud Zahar said Saturday that Egypt has decided to close its breached border with Gaza on Sunday, and Hamas will not stand in the way.

Zahar spoke upon his return to Gaza after holding talks with Egyptian officials in Cairo.

At the same time, Zahar added, Egypt has agreed to coordinate with Hamas on some border issues and to enable thousands of Palestinians stuck in Egypt to head to third countries for which they have visas or residency permits.

These travelers are currently waiting in the Egyptian border town of El Arish for Egyptian approval to continue their travels.

Also Saturday, a senior Hamas negotiator said the movement would accept the return of European Union monitors to the Rafah border crossing if they reside in Egypt or in the Gaza Strip.

Hamas official Mohammed Nasser added, though, that Hamas negotiators in talks over the future of the crossing point told their Egyptian counterparts in Cairo that the movement has reservations about the international agreement requiring the monitors to be preset at the border point.

The EU monitors left the Rafah crossing in June 2007 when Hamas ousted the rival Fatah movement from Gaza in a bloody takeover.

The Hamas delegation has not received clarifications on its reservations, Nasser said.

Egyptian officials were not available for comment on Zahar's claims. It was unclear whether the border would be sealed hermetically, as it was before Hamas blew up sections of the border wall on January 23, ending a seven-month blockade by Israel and Egypt. It also wasn't clear to what extent, if at all, Hamas' demand to be given a say in running the Egypt-Gaza border was being considered.

In an interview with Associated Press Television News, Zahar suggested the Egyptians planned to reopen the border after talks with European officials arriving in the region.

"Tomorrow they [the Egyptians] are going to start dialogue with the European people in order to make an end for our sanctions and to allow opening of the gates freely and without preconditions," he said.

The EU foreign policy chief, Javier Solana, was expected to arrive in Cairo for talks with Egyptian officials later Saturday. The international Mideast envoy, Tony Blair, was also planning a trip to the region in coming days to address the border standoff.

Zahar was greeted Saturday by supporters at the border. Since the breach, hundreds of thousands of Gazans have flooded Egypt's border area and Hamas has thwarted repeated attempts by Egypt to reseal the border.

The Hamas leader said Egyptian officials told him they would restore order at the border. "Egypt's message was very clear, that Sunday should be the day to put an end to this scene," Zahar told the Arab satellite TV station Al Jazeera.

At the border, Zahar said gunmen would not be allowed to bring weapons close to the border, or use bad words or violence towards Egyptian police.

Zahar, who is widely seen as the mastermind of Hamas' violent takeover of Gaza in June, said Hamas would cooperate with Egypt in its efforts.

"We will work to close the border between us and Egypt," Zahar said. "We will restore control over this border, in cooperation with Egypt and gradually."

At the closed Rafah border crossing, around 600 women loyal to Hamas protested to demand its opening. The women, many wearing black robes and headcoverings, held up green Hamas flags and chanted on the Palestinian side of the crossing.

Some of the women said the gaps in the border - created by Hamas militants - had not resolved pressing issues created by Gaza's closure to the outside world. The sick still need to travel, we need cement, said Naima Diab, a 55-year-old Hamas loyalist wearing a black robe with a white headscarf, sitting on a nearby rock.

On Friday, Hamas militants hauled away metal spikes that Egyptian soldiers had placed at sections of the Gaza-Egypt border in an attempt to stop the influx of Gazans.

Hamas' demand for a role in running the border with Egypt was rejected this week by Egypt and Hamas' rival, Fatah's moderate Palestinian President Mahmoud Abbas.

Hamas also announced Saturday that it would accept the return of European Union monitors to the Rafah border crossing on condition they reside in Egypt or Gaza. Hamas has said it opposes the 2005 arrangement that placed the EU monitors on the border because it granted Israel a final say over when the Gaza-Egypt border is open. The EU monitors are based in Israel, and Israel in the past frequently asked the monitors to stay away, citing security reasons, in effect shutting down border operations.

Mohammed Nasser, a senior negotiator on behalf of Hamas, said in Cairo that Hamas has reservations about the international agreement requiring the monitors to be present at the border point.

The Hamas delegation has not received clarifications on its reservations, Nasser said. The delegation was expected to return to Gaza on Saturday without holding talks with a Palestinian Authority delegation, which was also in Cairo negotiating the future of the border crossing.

Last month's border breach came several days after Israel had imposed a complete blockade on Gaza, with Egyptian backing, in response to Qassam rocket barrages from Gaza on southern Israeli towns. For the past seven months, since Hamas' takeover of Gaza, Israel and Egypt have severely restricted access to the territory.

Meanwhile, Egyptian authorities on Friday reported that they had arrested 12 Hamas militants, armed with explosives, within Egyptian borders. The men, having entered Sinai through the breach in the border, were apparently planning to carry out attacks against tourists in Sinai.