AL QUDS, Dec 30: Israeli Prime Minister Ariel Sharon reached a deal with Shimon Peres on Thursday to name the opposition leader his senior deputy, clearing a key obstacle to a unity government able to abandon the occupied Gaza Strip.

Israeli troops killed five Palestinians on a raid into Gaza, where bloodshed has not ebbed despite new peace hopes after Yasser Arafat's death and expectations that moderate Mahmoud Abbas will win Palestinian elections next month.

Most Israelis want to quit Gaza and right-winger Sharon has been negotiating with centre-left Labour opponents on a unity government able to uproot settlers from the Palestinian territory and a small chunk of the West Bank next year.

To end legal wrangling over titles, Sharon and Peres agreed that the Labour leader and Nobel peace laureate would be the most senior "deputy to the prime minister" in the new coalition. But the ruling Likud's Ehud Olmert would keep his position as the real next in line to Sharon with the title of "acting prime minister", standing in where necessary and taking over if Sharon dies, officials in Sharon's office said.

"The green light has been given for putting together a government," said Michael Eitan, chairman of the parliamentary committee that would otherwise have needed to discuss amending the law.

Israeli commentators said a government could be named as early as Monday. Sharon's plan is to evacuate 8,000 settlers living among 1.3 million Palestinians in Gaza, captured by Israel in the 1967 war. Four of 120 West Bank settlements would also go.

Palestinians fear that Sharon's "disengagement plan", backed by western countries, will give them Gaza at the cost of a stronger Israeli hold in the West Bank. Both territories were captured by Israel in the 1967 Middle East war. Violence in Gaza has intensified ahead of a withdrawal. -Reuters