JERUSALEM (Reuters) – Israeli officials played down reports on Friday that a deal was close with Hamas that would include the release of an Israeli soldier held captive in the Gaza Strip in exchange for Palestinian prisoners held in Israeli jails.

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, ceasefire agreements, an easing of Israel's merciless blockade on Gaza and rapprochement between rival Palestinian factions.
A July 7 deadline set by Egypt for the Islamic resistance movement 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 fueled 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 regime has long baulked at Hamas's price for Shalit's release.
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 is keen to bolster its support among the 1.5 million Gazans by improving supplies.
Aziz Dweik, the speaker of the Hamas-dominated Palestinian parliament elected in 2006, told Reuters on Thursday, two days after he was released himself from an Israeli prison: ""The Egyptians are behind the package deal which is expected to speak about the truce, to speak about opening all the crossings to (the) Gaza Strip and to speak about Shalit.""
""We would like (it) to be accomplished in the very few coming days because I left ... almost 11,000 prisoners in Israeli jails,"" Dweik added, speaking in English.
During a European tour this week that included talks with French President Nicolas Sarkozy which touched on the Shalit case, Netanyahu said on Tuesday: ""We are making efforts on various levels. We are now testing various possibilities.""
One possibility, cited by an Israeli political source, was that a step-by-step deal could begin with Hamas moving Shalit to Egypt, where he would stay with access to his family. Israel, in turn, would begin to open Gaza's border crossings. The two sides would then hammer out a final agreement on Hamas prisoners.
The possible complexity of any deal is daunting, however:
- Israel wants Shalit back and an end to threats from Hamas;
- Hamas wants hundreds of its own prisoners released, both by Israel and by Abbas's Palestinian Authority in the West Bank, as well as promises from Israel not to renew attacks on Gaza;
- Abbas wants Fatah prisoners released in Gaza and an accord that will restore his authority in the Hamas-governed enclave.