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By Jon Leyne
BBC News, Jerusalem
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Weeks of talks have not established a unity government
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It is the issue that refuses to go away, despite lavish doses of wishful thinking. The refusal by Hamas to recognise the existence of the state of Israel is blocking the formation of a government of national unity.
Without this key piece in the jigsaw, it is difficult to see how the flow of desperately needed foreign aid money can resume.
For Hamas the issue is, literally, a question of theology.
The Hamas charter states that: "The Islamic Resistance Movement believes that the land of Palestine is an Islamic Waqf [endowment] consecrated for future Muslim generations until Judgement Day. It, or any part of it, should not be squandered: it, or any part of it, should not be given up."
Yet at the United Nations on Thursday, Palestinian Authority President Mahmoud Abbas insisted that the Palestinian government of national unity that he is trying to form - and which would include Hamas - would recognise Israel.
It's hard to see what basis he had for that statement. And within hours, a senior Hamas official repeated the organisation's adamant opposition to recognising Israel.
Government delay
For months, Hamas and the Fatah faction that is led by Mr Abbas have been trying to find some way round the issue.
Last week they announced agreement on the elusive government of national unity.
The issue of recognising Israel was avoided though. It became clear that without that being resolved, aid flows would not resume.
So far the new government has not materialised.
Could more be going on behind the scenes?
Earlier this week the Middle East quartet, which includes representatives of the United States, EU, UN and Russia, issued a statement seen by some as a change of policy on the issue.
Hamas believes the quartet has softened its demand that Hamas recognise Israel. The Israeli government sees no change in policy.
Desperate conditions
It seems clear that many officials in Europe and the United Nations are uneasy about the effect of the Western boycott of Hamas.
Conditions for Palestinians, particularly in Gaza, are desperate
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Most Palestinian government salaries have not been paid for months, depriving the whole Palestinian economy of resources. Conditions, particularly in Gaza, are desperate.
So could some form of words break the deadlock?
One idea is for the new government to recognise Israel, but not Hamas.
But at the moment the new government is due to be led by the existing Hamas Prime Minister, Ismail Haniya.
Surely such a deal would put him in an impossible position.
Would the Europeans be prepared to give aid money if the finance ministry were not under Hamas control?
Ambiguity
It's difficult to see how that would square with the demand for the Palestinian government to recognise Israel.
Or could Hamas agree to some ambiguous form of words?
A senior figure in Fatah has suggested that Hamas might agree to abide by agreements made by the Palestine Liberation Organisation, that recognise Israel.
This might avoid Hamas itself having to make the explicit commitment.
They are the sort of solutions that would not satisfy the Israeli government, nor the Americans.
Conceivably they might give European governments enough cover to resume aid payments.
But it's hard not to think that at the moment, it's still mostly wishful thinking.
One-Minute World News
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