Palestinian prime minister Salam Fayyad said on Saturday he intended to resign by the end of March in a move that could help bolster unity talks between the rival Fatah and Hamas factions.

But Palestinian president Mahmoud Abbas, the Fatah leader who appointed Fayyad after Hamas took over the Gaza Strip in 2007, said he asked the prime minister to continue until results emerged from Egyptian-sponsored talks between the factions over forming a unity government.

'Brother Salam Fayyad has submitted his resignation to us in order to support and strengthen the Palestinian dialogue on forming a government,' Abbas told reporters.

Islamist Hamas has long criticised Fayyad, accusing him of doing the bidding of the United States and other Western powers which finance his government in the Israeli-occupied West Bank.

Abbas's authority has been limited to the West Bank since Hamas wrested control of the Gaza Strip in June 2007 after routing Fatah forces there. Unity talks were expected to resume in Cairo on Tuesday.

Palestinian officials and Western diplomats said it was unclear whether the two factions would be able to form a coalition acceptable to Western powers, which shun Hamas for refusing to renounce violence and recognise Israel.

Abbas wants the factions to form a unity government of non-partisan technocrats to spearhead reconstruction of the Gaza of the Gaza Strip after Israel's 22-day offensive and to prepare the way for new Palestinian elections.

Hamas won a 2006 parliamentary election but its government was boycotted.

'This move is meant to encourage the dialogue,' an aide to Abbas said of Fayyad's resignation. 'If we do not reach an agreement, the president can ask Fayyad to continue as prime minister.'

Hamas spokesman Fawzi Barhoum said he believed Fayyad's announcement was motivated by 'internal and personal differences' with Abbas and not part of an effort to promote unity.

A senior Western diplomat said Fayyad had said privately in recent weeks that he wanted to leave his post 'because he doesn't see any hope' of healing factional rifts or making progress in peace talks with Israel.

Israeli prime minister-designate Benjamin Netanyahu has been cool to US-backed peace talks and has ruled out ceding parts of Jerusalem to the Palestinians and freezing Jewish settlement growth in the West Bank, key Abbas demands.

The US and the European Union have strongly backed Fayyad, and they have privately urged him to stay on, possibly to head a unity administration, diplomats said.-Reuters