Israel´s incoming unity government must halt all settlement activity on occupied land, if it wants peace negotiations, a Palestinian official said Tuesday.

"This is the right time for the Israeli government to reach peace with the Palestinian people by immediately accepting the requirements of the peace process," said Palestinian President Mahmoud Abbas´ spokesman, Nabil Abu Rudeineh.

"This demands an immediate halt to settlement activities in all the Palestinian territories," he said in a statement on the official Palestinian Wafa news agency.

Earlier on Tuesday, Netanyahu and Mofaz reached a surprise agreement to form a national unity government, a decision which came as the Knesset was preparing to disperse for early elections, which were expected to be scheduled for September 4.

Speaking at a joint press conference with Mofaz on Tuesday, Netanyahu said the unity government was formed to tackle the" toughest questions facing Israel."

"And here were are together, Shaul and I and the rest of the coalition, saying we´re pulling together for four main issues: to pass a fair and equal replacement of the Tal Law; to pass a responsible budget; to change the system of governance; and, lastly, to try and promote a responsible peace process."(© Copyright 2012 Ha´aretz 05/09/12)