The announcement that Mahmoud Abbas, the Palestinian President, has begun talks with Hamas on forming a broad-based government of national unity raises hope and foreboding in almost equal measure. If the result is an administration pragmatic enough to recognise Israel, persuade the West to resume its financial support and bring the promise of salary payments and effective authority to the Palestinian territories, it could signal a breakthrough that both Israel and the Palestinians desperately need. If, on the other hand, the proposal indicates that the beleaguered Mr Abbas has dropped all idea of a referendum and moved towards the rejectionist position of Hamas, the prospect of any improvement in the miserable conditions in Gaza is bleak.

That referendum was to have been held a week ago, but the war in Lebanon ruled out any such idea. That suits both sides: Hamas knew that most Palestinians would support a form of words that recognises Israel if this eases the restrictions on movement and unfreezes the Western aid without which most government salaries cannot be paid. Mr Abbas, however, may have feared that, given the albeit probably temporary prestige that Hezbollah enjoys in the Arab world, the mood might have hardened and voters would want to give Hamas a moral victory. That would have made his own position untenable.

The conflict has certainly changed perspectives in Gaza. It has usefully diverted the world’s attention while the two sides were circling each other, painstakingly trying to find common positions. That involves compromise, which Hamas is reluctant to see undelined publicly. For months it has been floating trial balloons, attempting to find a form of words sufficiently flexible over Israel to unlock Western aid but intransigent enough to reassure its core voters that it has not surrendered its position. Clearly, some progress has been made behind closed doors, as Mr Abbas would not otherwise have suggested that a national unity government may soon be possible — even if the details remain to be settled.

Though Hamas and other Palestin-ians have been heartened by Israel’s failure to win decisively in Lebanon, the conflict has not emboldened militants. Unlike Hezbollah, Hamas presents no real strategic challenge to Israel, which can easily reoccupy Gaza or target militants. Palestinians fear that Ehud Olmert, the Israeli Prime Minister may be tempted to hit out in Gaza to bolster his authority.

The history of the Middle East shows that it is often only strife that spurs fresh thinking about peace. Some Palestinians are now cautiously voicing hopes that the peace process may be resumed. They are probably being too optimistic. Israel is hurt and so too is Hezbollah, more than has been recognised. But the main conclusion drawn by the Israeli public is that unilateral withdrawal from occupied territory does not bring added secur-ity. A Palestinian government of unity, if it can be reached, might make things more tolerable in Gaza. But there is a long way to go before real peace talks look attractive to either side.