Fatah and Hamas leaders meeting in Mecca signed a pact last night to form a power-sharing government, bowing to pressure from the Arab world to bury their differences for the sake of Palestinian unity and head off a looming civil war.

It was uncertain, however, whether Hamas had moved far enough towards meeting international demands that it recognise Israel to lift a boycott of the Palestinian Authority in force since the Islamists came to power in an election one year ago.