Palestinian president Mahmud Abbas said on Tuesday that Israel's new government, which will include the centrist Kadima party, should renew efforts to seek peace.
But the Islamist movement Hamas, which controls the Gaza Strip, gave a bleak assessment of the surprise coalition agreement, which will see the Kadima party join Prime Minister Benjamin Netanyahu's government.
"We call on the Israeli government to seize the occasion of the enlargement of the coalition to speed up the achievement of a peace deal with the Palestinian people and their leaders," Abbas' spokesman Nabil Abu Rudeina said.
"The moment is right for the Israeli government to achieve peace by responding immediately to the demands of the peace process and a two-state solution," he said in a statement.
At a press conference announcing their decision to go into government together, Netanyahu and Kadima leader Shaul Mofaz both called for talks with the Palestinians.
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"I hope Abbas will use this opportunity to resume the peace negotiations. I don't know how you advance negotiations without engaging in them," Netanyahu said.
The Palestinians have refused to restart direct talks unless Israel freezes settlement construction and agrees to a framework for discussions on borders that is based on the lines that existed before the 1967 Six-Day War.
Mofaz, who has said he favours a deal that would put in place interim borders -- a proposal rejected by the Palestinians -- said he had "some ideas how we can move forward in order to achieve understanding with the Palestinians."
"My idea is borders and security arrangements first. We discussed these issues in the past and will continue to do so in the future," he said.
In Gaza, reaction to the new government was downbeat, with the political advisor to Hamas prime minister Ismail Haniya calling the coalition a "threat."
"The formation of the national unity Israeli government represents a grave threat to the Gaza Strip and strikes a blow to Abbas's project of negotiations," Yusef al-Rizq said in a statement.
"The majority of the main assassinations of leaders of the Palestinian people were carried out under Mofaz's command," Rizq added, referring to a slew of Israeli operations targeting senior Hamas members.