CAIRO - Palestinian President Mahmoud Abbas' Fatah group inked a deal on Wednesday with bitter rival Hamas to end their long-running feud and form an interim government ahead of elections within a year.

Israel said the accord, which was brokered in secrecy by Egypt, would not secure peace in the Middle East and urged Abbas to carry on shunning the Islamist movement, which has governed the Gaza Strip since 2007 after ousting Fatah.

Forging Palestinian unity is regarded as crucial to reviving any prospect for an independent Palestinian state, but Western powers have always refused to deal with Hamas because of its refusal to recognize Israel and renounce violence.

"We have agreed to form a government composed of independent figures that would start preparing for presidential and parliamentary elections," said Azzam al-Ahmad, the head of Fatah's negotiating team in Cairo.

"Elections would be held in about eight months from now," he said, adding the Arab League would oversee the implementation of the agreement.

In the West Bank city of Ramallah, Abbas spokesman Nabil Abu Rdainah said the reconciliation was not Israel's concern.

"Netanyahu must choose between a just peace with the united Palestinian people ... and settlements," Abu Rdainah said.

At a news conference in Cairo, where the Fatah and Hamas leaders sat side by side, Ahmad said Palestinians had paid a heavy price for their infighting.

"We are proud that we now possess the national will to end our divisions so we can end the occupation of Palestine ... the last occupation in history."

Hamas' deputy leader, Moussa Abu Marzouk, added: "Our rift gave the occupation a chance. Today we turn a new page."

The Palestinian unity deal agreed in Cairo crossed "a red line", Israel's Avigdor Lieberman said on Thursday, warning that an array of measures could be taken against the Palestinian Authority.

"With this accord, a red line has been crossed," the ultra-nationalist foreign minister told Israel's military radio a day after the Palestinian parties announced the reconciliation agreement.

Reuters-AFP