Israel plays down reports of imminent Gaza deal

Israeli and Palestinian political sources and Western diplomats confirmed, however, that Egyptian mediators were still working on a package of measures that could combine exchanges of prisoners, cease-fire agreements, an easing of Israel's blockade on Gaza and rapprochement between rival Palestinian factions.

A July 7 deadline set by Egypt for Islamist Hamas and the Fatah faction of Palestinian President Mahmoud Abbas to ease a schism that has divided Gaza from the West Bank, as well as this week's third anniversary of Hamas's capture of Israeli soldier Gilad Shalit, has fuelled speculation of a deal.

Responding to Israeli press reports citing European diplomats that Shalit was about to be sent to Egypt, Israeli officials and European diplomats in the region said on Friday they knew of no new concrete developments in negotiations.

Hamas officials have also played down earlier reports.

Nonetheless, diplomats said negotiations were in train.

The family of Shalit, who also has French citizenship, has stepped up pressure on new Israeli Prime Minister Benjamin Netanyahu to reach a deal. The government has long baulked at Hamas's price for Shalit's release, notably the freeing of leading Hamas militants responsible for attacks on Israelis.

Netanyahu is also under pressure from the United States and its European allies to ease a blockade on Hamas-ruled Gaza that has prevented billions of dollars in foreign reconstruction aid from reaching the enclave since Israel's offensive in January.

Israel, which is also under U.S. pressure to renew peace talks with Abbas, has tied the blockade to the fate of Shalit.

An Israeli government official said Netanyahu wanted the international community to pressure Hamas, not Israel: "Hamas has held Gilad Shalit for some three years. He hasn't even been given one visit by a representative of the Red Cross.