This is big news, the last time Hamas was part of a unity government with the Palestinian Authority the US withheld all funding (over $470 million a year). Unless Obama does the same we will be showering Hamas with cash, on the other hand if he does cut off the cash spigot to the Palestinians his lefty base will throw a nutty.

(IPT) — Officials from the rival Palestinian Fatah and Hamas movements have reached a reconciliation agreement, ending a four-year old split that led to the establishment of separate governments in the West Bank and Gaza Strip. The agreement calls for the formation of a unity government in the next few days and preparations to have presidential and legislative elections a year from now.

“The two sides signed initial letters on an agreement. All points of differences have been overcome,” said Taher Al-Nono, the government spokesman for Hamas in Gaza. . . .

To reach an agreement, Hamas leaders demanded a full power-sharing deal, including a division of security responsibilities. They also insisted on the release of hundreds of Hamas members imprisoned in the West Bank, the re-opening of outlawed Hamas charities, and the removal of a ban on Hamas activities in the West bank.

The recent push for an agreement with Hamas comes amidst a large-scale effort by Abbas to gain international recognition of Palestine as an independent state without signing a peace deal with Israel. The United Nations is expected to vote on this issue in September.

The U.S. administration, for its part, is the largest single donor to the Palestinians, providing more than $470 million a year in direct financial assistance. The U.S. withheld this support when Hamas was part of the Palestinian unity government in 2007 and will likely do so again unless Hamas agrees to renounce violence and recognize Israel. Hamas has so far shown no signs that it is willing to do either.

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Update: Good analysis by CFR’s Elliot Abrams.

This deal, if it is real, will be interpreted in Israel as a choice by Palestinian president Mahmoud Abbas to make peace with Hamas rather than with Israel. It is hard to see how Israel could negotiate with a Palestinian government half or more of which represents a terrorist group dedicated to attacking the Jewish State. Formally, it is not the Palestinian Authority but the PLO that negotiates with Israel, but that formality will hold little political weight. As this deal does not appear to require Hamas to change one word of its violently anti-Semitic Charter, the new Palestinian government would hardly be a peace partner.

Other questions arise. Will Salam Fayyad, the current prime minister, maintain his post? If not, how will Congress and other donors feel about continuing the aid flow to the PA? Even if Fayyad remains, will Congress vote aid funds for this new half-Hamas government? What will lawyers at the Treasury and State Departments say about the participation of a terrorist group in the PA government? Will it even be legal to give funds to the PA?

We’ll all know more in the coming days, but this move by President Abbas vastly complicates U.S. efforts in the region and the Obama Administration’s current negotiations with Prime Minister Netanyahu. How can he be expected to lean far forward in seeking a deal with the Palestinian leadership just when it is leaning away from Israel and toward

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