THE Palestinian government held a cabinet meeting in Gaza yesterday — hailed by the UN envoy as vital to lifting the Israeli blockade on the Palestinian territory.

After meeting Palestinian Prime Minister Rami Hamdallah in Gaza, UN Special Co-ordinator for the peace process Nickolay Mladenov said the development “should facilitate the lifting of the movement and access restrictions on Gaza.”

The meeting was the fruit of recent detente between President Mahmoud Abbas’s ruling Fatah party and Hamas, which took control of Gaza in 2007 after winning elections the previous year and has been engaged in a bitter feud with Fatah since that time.

Mr Hamdallah arrived on Monday to a hero’s welcome.

"The only way to statehood is through unity," he told the crowd. "We are coming to Gaza again to deepen the reconciliation and end the split."

Last month Hamas announced that it would dissolve its administration in Gaza and was ready for elections to form a unity government ruling over both the strip and the West Bank.

However Hamas has refused Mr Abbas’s demand to disarm its military wing. The Islamist group’s leader Ismail Haniyeh insisted that the party’s armed wing would mostly disarm but would reserve the right to “resist the occupation.”

Yesterday Israeli Prime Minister Benjamin Netanyahu tried to put conditions on the peace deal, telling a meeting of his Likud party: "We are not prepared to accept bogus reconciliations... at the expense of our existence."

The Gaza Strip has been under siege by Israel since 2007. The 11-year blockade has impoverished Gaza’s economy and left its two million inhabitants without adequate electricity, food, water or health services.