Jerusalem (CNN) -- As Palestinian political factions prepared Tuesday to formally sign a political reconciliation agreement in Cairo, Israeli Prime Minister Benjamin Netanyahu called on the Palestinian Authority to pull out of the deal, saying it would jeopardize the already-stalled Middle East peace process.
Meeting with Middle East Envoy Tony Blair in Jerusalem, Netanyahu called on Palestinian President Mahmoud Abbas to "immediately cancel the reconciliation deal with Hamas and choose the path of peace with Israel."
The Egyptian-brokered agreement, word of which was first announced last week, seeks to mend the political differences between the two largest Palestinian factions: Abbas' party, the West Bank-based Fatah and the Islamist group Hamas, which rules Gaza.
"The agreement between Abu Mazen (Abbas) and Hamas is a hard blow to the peace process," Netanyahu told Blair. "How can peace be achieved with a government (in which half of the ministers) call for the destruction of the State of Israel and praises the master killer Osama bin Laden?"
The agreement between Hamas, Fatah and other smaller Palestinian factions calls for the establishment of a new Palestinian caretaker government and for parliamentary and presidential elections to be held next year.
It is not clear who might lead a caretaker government, but there has been much speculation in the Palestinian and Israeli media that the current Palestinian Authority prime minister and political independent Salam Fayyad may not be asked to return. A former International Monetary Fund official who has won plaudits from the West for his stewardship of the Palestinian economy and reform of its security apparatus, Fayyad is reviled by many in Hamas who consider him a lackey for the United States and Israel. He's also resented by many old-guard Fatah officials for the policy control he exerts.
Fayyad's exclusion from a future government would likely contribute to pressure on American and European governments to curtail the hundreds of millions of dollars given to the Palestinian Authority every year. At a press conference Monday in Ramallah, Fayyad downplayed the importance of any future role he may have in the new government.
"it is important to start an immediate implementation of the understandings related to bringing back unity (to our homeland). The focus should be on this. The issue of who will be the prime minister and who will be the ministers in this government -- all of this is related to the (Fatah-Hamas) agreement. Whatever comes out of this agreement will come out -- and this government should be able to perform its duties with the required skills and efficiency. There should be a smooth transition of governance and administration functions," Fayyad said.
Officials from Fatah and Hamas said they will form a special committee to handle security, which has been one of the most contentious points of division between the two parties, who have been in open conflict since 2007 when Hamas seized power in the Gaza.
The head of Fatah's parliamentary block, Azzam al-Ahmed, told the government-run news agency WAFA that the agreement was "historic" and that preparations were being made for the formal signing ceremony Wednesday in Cairo.
Both Israel and the United States consider Hamas a terrorist organization and have voiced strong opposition to the inclusion of the group in any unity government, demanding that it first renounce violence, recognize the state of Israel and abide by all previous agreements.
Netanyahu is scheduled to meet with leaders in London and Paris this week in an effort to convince the international community not to recognize any Palestinian government that might include Hamas.
A senior Israeli government official told CNN that the government views Hamas involvement as a "fundamental impasse" and that "if anyone had any illusions that Hamas was somehow more moderate, they saw yesterday with the statements that they put out about bin Laden, that is clearly not the case."
In a Monday news conference, Hamas Prime Minister Ismail Haniya condemned the killing of bin Laden, referring to him as a Muslim holy warrior who was the victim of American oppression.