Gershon Baskin claims that he knows that [Hamas Prime Minister Ismail] Haniyeh and his people want a cease-fire, and want it to be observed by Israel as well.

Could the release of Gilad Shalit trigger a new impetus for Israeli-Palestinian talks?

As reports emerged from the Arabic press of an impending prisoner swap to free the Israeli corporal from Hamas captors in the Gaza Strip, there were growing calls for a resumption of talks between Israel and Palestinian President Mahmoud Abbas.

The chorus includes Israeli cabinet ministers such as Defense Minister Amir Peretz and Foreign Minister Tzipi Livni, and most recently Deputy Prime Minister Shimon Peres.

An aide to Peres told The Jewish Week that the Nobel Peace laureate supports opening two parallel paths of dialogue with the Palestinians. The first would involve an Olmert-Abbas summit would focus on making progress under the U.S.-sponsored road map. Earlier this week, Israeli Prime Minister Ehud Olmert said he was ready for a dialogue with Abbas, whom he last met informally on June 23.

The second would involve joint economic projects, such as a canal between the Red Sea and the Dead Sea, which would be easier to advance because they are less political in nature. “He said that after the Gilad Shalit abduction is solved we can move along two paths,” said aide Yoram Dori. However, the road map “is much harder because of the split among the Palestinians,” he added, referring to Hamas’ control of the cabinet.

Other analysts said there’s a new commitment among Olmert’s staff to restarting bilateral meetings, even if it’s tempered by skepticism about whether Abbas will ever be able to deliver on Israeli security demands to shut down terrorist cells in the West Bank and Gaza. “Agreeing to meet with each other for the first time opens up possibilities,” said Gershon Baskin, the co-chairman of the Israel Palestinian Committee on Research and Information.

Arabic-language newspapers in Egypt, Qatar and London all reported this week on a developing deal to swap Shalit for hundreds of Palestinian prisoners. The deal was rumored to contain a cease-fire understanding between Israel and the Palestinians that would allow Israel’s army to end two months of frequent incursions and strikes in Gaza and pave the way for the release of Hamas politicians arrested by Israel after the abduction.

Israeli officials, including Dori, said they had no knowledge of the deal. In nearly two months since Shalit’s kidnapping, some 226 Palestinians have been killed by Israeli forces. Baskin said that Hamas craves a deal that would provide some stability in the Palestinian territories.

In addition to frequent military incursions into Gaza — six Palestinian terrorists were killed in Gaza this week in a 24-hour period — Israel has shut down the Rafah crossing between Gaza and Egypt in order to prevent the kidnappers from smuggling Shalit over the international boundary. Defusing the crisis would allow Hamas ministers a chance to try their hand at governing. “I know that [Hamas Prime Minister Ismail] Haniyeh and his people want a cease-fire, and want it to be observed by Israel as well,” said Baskin. “They need it. They made a lot of promises to the electorate about being more responsive and giving services. They can’t do any of that.”

Aaron David Miller, a former Middle East adviser to six secretaries of state, said that although the Israelis have been mum about negotiations for Shalit’s release, it is expected that “Israel will have to let go many Palestinians” and that it will “try to create some sort of cover for the release so that it would not be directly implicated in negotiating with Hamas.”

Asked about the large number of Palestinian prisoners released in the past for just one or two Israelis, Miller replied: “Once you go to extreme lengths to get back bodies [of soldiers] and hostages — which in Israel is at the level of a sacred mission — you have to accept some unseemly behavior, including negotiating with terrorists.”

He added that he believes that within days or weeks, Shalit and the two Israeli soldiers held by Hezbollah will all be released, although at different times. But Miller said he does not believe the releases will come as a result of the intervention of United Nations Secretary-General Kofi Annan, who this week appointed a mediator to win their freedom.

Yossi Alpher, a political analyst and editor of the Israeli-Palestinian Web site bitterlemons.com, said one way to make it appear that Israel did not engage is a prisoner swap is for Olmert to say that he had promised Abbas that such a Palestinian release would take place. ”It would make it appear that he was carrying out an old promise and not making a concession to Hamas,” Alpher said.

At a time when Hezbollah has enjoyed a surge in popularity throughout the Arab world from a month-long war with Israel, Hamas is coming under domestic pressure to resolve the financial crisis and governmental paralysis in the West Bank and Gaza Strip.

That’s helped to drive negotiations between Hamas and the deposed Fatah Party on a national unity government in which the two would share power. Some believe such an arrangement would also enable Abbas to lead negotiations with Israel.

A civil servants’ strike led by Abbas’ Fatah Party is highlighting the widespread disillusionment with Hamas after a U.S. and European aid boycott has forced public employees to go without pay for six months. On Tuesday, hundreds of armed security men broke into the Palestinian legislature building in Gaza to protest the lack of salaries.

The walkout is expected to give the moderate Abbas more leverage to convince Haniyeh into relenting on rejection of peace talks with Israel.

“We just want to feed our families,” said Jihad Abu Zneid, a Fatah legislator. “We need early elections.”

And yet, Hamas knows that its majority rule in parliament is safe for now because Fatah hasn’t recovered from the January election landslide. So instead of the Islamic-led government falling, it may strike a compromise to invite Fatah in a unity coalition.

“When the Palestinian government becomes incapable of delivering, it will be frank with the people,” said Mohammed Barghouti, the Hamas-appointed Palestinian Social Welfare Minister. “The solution is unity and a domestic agreement that respects both parties.”

Though Israeli politicians aren’t likely to embrace a Palestinian Authority with a more limited Hamas representation, some say that cooperating with the government might be Israel’s last chance of averting a collapse of the Palestinian Authority and the outbreak of a new uprising.

“A Palestinian Authority which is capable of providing for the basic needs of its citizens and even stopping fire into Israel, is a clear Israeli need,” Gidi Grinstein, a former peace negotiator and the head of the Reut Institute, a Tel Aviv think tank, wrote in Yediot Achronot.

The longer Israel’s incursions into the Gaza Strip last, the more allegations are emerging that Israel wants to undermine the Hamas government, Grinstein said. Israel must recognize that there’s no alternative to Hamas, and help figure out a way to avert a Palestinian implosion, Grinstein said.

“The pill that Israel must swallow is bitter,” he said. “It must give up on legitimate and just claims. The best that Israel can hope for is a cease-fire accompanied by de facto Hamas recognition of the government of Israel and existing agreements. There’s no other way right now.”

Hamas officials like Barghouti have tried to pin the financial crisis on Israel and the U.S., which refused to accept the Islamists’ landslide victory in January. But the Palestinian public sector strike that began over the weekend is shifting blame for the paralysis.

“The crisis has reached the peak. People can’t wait any longer without income,” said Samir Barghouti, the director of the Arab Center for Economic Development. “The Arab pressure, the international pressure and the Israeli pressure have worked. Regular people are saying, ‘We elected Hamas and we trust Hamas, but Hamas is not able to bring results.’”

As they ticked off strike participation rates for cities around the West Bank and Gaza for reporters, union leaders and legislators from Fatah sought to put the government militants on the defensive. Officials said that the civil servants timed the strike at the beginning of the school year because the families would be feeling the economic pinch most acutely as they spend money to prepare children for school.

“The Palestinian people are living in an economic and social crisis, regardless of the Americans and Israelis,” said Basem Hadaydel, a spokesman for the teachers’ union. “I hope Hamas understands the dangerous situation that we are in.”

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Joshua Mitnick

Joshua Mitnick has reported on Israel and the Palestinian territories for the Monitor since 2004. He has covered the second Palestinian Intifada, Israel’s 2005 withdrawal from the Gaza Strip, the 2006 Lebanon War, and the 2008-2009 Gaza War. He has also reported from Tunisia, Lebanon, Jordan, Turkey, Egypt and India. A native of Highland Park, N.J., Josh graduated from the University of Michigan (Go Blue!) with bachelor's and master's degrees in political science. As an undergraduate, he was the managing editor of the student newspaper, The Michigan Daily. Josh moved to Israel in 1997 and got his first reporting job at Bloomberg News. Today he also files for The Wall Street Journal. Josh lives in central Tel Aviv with his wife, three children, and dog.