MARK COLVIN: The new alliance between the two major Palestinian groups, Hamas and Fatah, has changed the political landscape in the Middle East.

For the past seven years Palestinians have been divided. A short, brutal civil war in 2007 left Hamas running Gaza, and the previously dominant Fatah-based Palestinian Authority was left to run the West Bank. Today they announced a pact which would see a Palestinian government of national unity within weeks and elections soon after.

The Israeli reaction was swift and damning, accusing Palestinian president Mahmoud Abbas of choosing to make peace with Hamas instead of with Israel. But in the streets of Gaza some were celebrating the promised reunion.

The ABC foreign affairs analyst and former Middle-East correspondent Tim Palmer joins me now. So, Hamas and Fatah - there are still big things that you would think divide them. Why should we think that they're more likely, that this pact is more likely to hold now?

TIM PALMER: Quite. It was a brutal division in 2007, with arbitrary killings and imprisonment straight off the streets. Much of that has passed under the bridge, it seems, now.

And while there have been some fairly short-lived attempts to reunify the factions in the past, this time there does appear to be a more concrete and agreed process. One that has the path to elections set down within months, and which sees some sort of agreement that president, the Palestinian Authority president, Mahmoud Abbas, along with a coterie of technocrats, as they're called, neutral figures, will have a transitional role to that. That seems more agreed.

Probably the best indicator of confidence, Mark, were this time, Hamas is this time negotiating from a position of weakness. That has nothing to do with anything happening in the Palestinian territories and Israel itself. It's because of what's happening in Egypt.

When the Muslim Brotherhood was toppled from power then and then driven back underground, Hamas not only lost one of its chief allies in the region, it also saw an incoming government seal off the border with Egypt far more tightly than at any previous time.

MARK COLVIN: So those famous tunnels aren't working the same way?

TIM PALMER: The tunnels were policed in a way that not even the Israelis had managed to achieve, and the Rafah Crossing, the official border, was closed.

This is the artery for what little economy exists in Gaza, and so as the misery level in Gaza rose, with power blackouts routine, and not even access to clean water, let along supplies and any economic activity, and Hamas was left penniless and looking politically damned there, Hamas has turned to essentially sue for national unity with the Palestinian Authority.

MARK COLVIN: So how is that going to improve the lot of Gazans because presumably this pact isn't going to make the military strongmen in Egypt any more helpful to them?

TIM PALMER: Well, there is the suggestion that the Egyptian government, the current government in Egypt, will be more friendly, will view a Palestinian Authority administered Gaza more openly, and may open the Rafah Crossing again. And that would radically transform the lives of Gaza, certainly economically.

MARK COLVIN: Well, Israel is obviously angry about this. What, how do you see this affecting possible peace negotiations?

TIM PALMER: Well, they've been uniformly negative. I mean, there were some very belligerent comments. Some of the tweets that came from the prime minister's office in Arabic used terms such as "Israel would be able to crush both Fatah and Hamas if it chose to do so".

In a more sober level, Israel cancelled next week's, next Wednesday's, planned negotiation meetings. But that won't mean much to the Palestinians because if this is about possibly torpedoing the peace negotiations, well, most Palestinians seem them as moribund anyway.

The past eight months have got nowhere. Meetings in the last few weeks between Saeb Erekat and Tzipi Livni have achieved no progress except for what the Palestinians see as further settlement growth.

So while Israel says you can't reach peace with Hamas and expect to negotiate peace with Israel at the same time, well the Palestinians will say, hang on, for the past year Israel's position has been that when we negotiate for peace as the Palestinian Authority, we aren't representing all of the Palestinian people, because we have no control over Gaza.

Well, here's a situation where we may now speak for all of the Palestinian people, and you're saying you won't talk to us because we're involved with Hamas.

MARK COLVIN: But Hamas won't recognise Israel in any - there is a big difference between the two on that question of recognition.

TIM PALMER: There is...

MARK COLVIN: Very briefly: who is now dominant in that sense?

TIM PALMER: Well, I think that's what the elections will determine. While the US has expressed disappointment, the European Union will probably be more moderate in its expression, but I think a lot of that could be smoothed away if Hamas' fortunes are reduced at a forthcoming election and the Palestinian Authority can entrench its power to some extent, as a more moderate front for a unified Palestinian administration.

MARK COLVIN: Tim Palmer, thank you.