Palestinian President Mahmoud Abbas and Prime Minister Ismail Haniyeh of Hamas attend a meeting in Gaza City earlier this week. (Maan Images)

The reconciliation between the leaders of the two major Palestinian groups, Hamas and Fatah, which was negotiated in Saudi Arabia last week, is being hailed as a major political breakthrough. But the national unity government created as a result of this agreement faces many daunting challenges.

The agreement needs to be followed by an effort to end the economic and administrative siege of Palestinian areas, as well as serious peace talks with Israel aimed at ending the 39-year occupation of the West Bank and the Gaza Strip. At home, the new government needs to pay its civil servants, restore law and order, and end the chaos that has become the norm in the Palestinian territories.

The internal fighting in Palestine began in part as a result of the political impasse caused after Israel and the international community imposed an economic embargo on the Palestinian Authority. This economic siege, zealously enforced even by Arab and Islamic banks, followed the new Hamas-led government's refusal to accept the demand by the "Quartet" - the United States, the European Union, the United Nations, and Russia - that it recognize Israel, accept all previous agreements with Israel, and renounce terrorism.

Palestinians complained that the international community acted unjustly, simply because they were unhappy with the result of a free and fair election in the Palestinian territories, which Hamas won overwhelmingly. The government created after the January 2006 elections has been unable to pay civil servants because of the international banking blockade and the refusal of Israel to transfer millions of tax dollars collected on behalf of the Palestinian people.

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After months without pay, the government, headed by Hamas' Ismael Haniyya, was confronted with a serious challenge in September, when civil servants went on strike, demanding to be paid. The differences between the Fatah-led presidency of Mahmoud Abbas and Hamas' Islamist government spilled into the streets. Threats by Abbas to hold elections to resolve the deadlock seemed to add oil to the fire.

With unemployment rising, income dropping to record low levels, and internal tensions escalating, fighting between supporters of Hamas and Fatah began. Attempts to reconcile the parties began in Gaza, before moving to Cairo, Damascus, and finally Mecca under the supervision of Saudi Arabia's King Abdullah, whose country has been a financial backer of the Palestinians for decades.

One of the first challenges for the new government will be to convince the international community that it respects previous Palestinian agreements. This includes the mutual recognition agreed by the Palestine Liberation Organization and Israel, as well as the Oslo Accords. By announcing the acceptance of previous agreements and supporting the Arab peace initiative, the new government should be able to bring economic normalcy to the cash-strapped Palestinian Authority.

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