Israel accused Hamas on Monday of hardening its stance in Egyptian-brokered talks on exchanging hundreds of Palestinian prisoners for a captured Israeli soldier, Reuters reported.
The terse Israeli statement, issued after two days of indirect talks in Cairo, dimmed the chances of a last-minute deal before Prime Minister Ehud Olmert leaves office.
Olmert was briefed by his two envoys and will hold a cabinet meeting on Tuesday afternoon to decide how to proceed with the negotiations, conducted through Egyptian mediation with Hamas, the Palestinian Islamist organisation that rules the Gaza Strip.
The statement issued by Olmert's office said Hamas had "hardened its stance, had gone back on understandings formulated during the past year and had raised its demands despite generous offers made by Israel in the current round of talks."
Olmert has made freedom for Gilad Shalit, an Israeli soldier held by Palestinian militants in the Gaza Strip since 2006, a precondition for a wider truce with Hamas and the reopening of the enclave's borders to crucial reconstruction aid after Israel's offensive in December and January.
In exchange for the soldier, Hamas has demanded the release of 1,400 Palestinian prisoners, including about 450 long-serving inmates. Some of those were convicted of attacks that killed Israelis, and critics say a large prisoner swap for Shalit could encourage Hamas and others to try to seize more soldiers.
"There is progress and there is a new (Israeli) proposal, but there are still some differences blocking conclusion of a deal," a senior Hamas official said.
An Israeli security source, suggesting the gap was narrowing, said earlier on Monday that the Jewish state was objecting to the release of fewer than 50 of the Palestinian prisoners demanded by Hamas.
Another dispute centred on Israeli demands that some of the prisoners be exiled.
"We reject expulsion," Abu Ubaida, spokesman of Hamas's armed wing, the Izz el-Deen al-Qassam Brigades, said on Sunday. "There is no room for more flexibility in our position."
Olmert had scheduled a cabinet meeting for Monday, but moved it to Tuesday to give his envoys, Yuval Diskin, head of the Shin Bet security service, and negotiator Ofer Dekel, more time to try to seal a deal.
"The ministers will be briefed on the negotiations," Olmert spokesman Mark Regev said. "If there is a need to take decisions, decisions can be taken."
Israeli media said earlier that the cabinet might decide on Tuesday to send the envoys back to Cairo for more talks.
Hamas was represented in the talks for the first time by top military commander Ahmed al-Jaabari -- a sign, sources said, of their seriousness.
Olmert, who has come under mounting public pressure to bring Shalit home, is in the final days of a three-year term marked by a 2006 Lebanon war that many Israelis see as a failure and a 22-day Gaza campaign that ended in January without achieving a complete halt to cross-border rocket fire.
Members of Olmert's outgoing administration have warned Hamas publicly that it may find a new government being formed by right-winger Benjamin Netanyahu less willing to deal on prisoners.
"We are not pressed for time," the senior Hamas official said. "There is room to achieve a breakthrough ... It needs a decision from the Zionist occupation."
Shalit, now 22, was captured in June 2006 by militants who tunnelled into Israel from the Gaza Strip and took him into the Hamas-ruled territory.
Israel has carried out lopsided exchanges in the past, trading large numbers of Arab prisoners for its captured soldiers or their remains.