Israel wants the Islamic militant Hamas to disarm, or at least ensure it cannot re-arm, before considering the group's demand that the territory's borders be opened. Israel and Egypt imposed a closure after the Hamas takeover of Gaza in 2007, although Egypt allows individuals to cross intermittently.
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"The two sides have reviewed what they consider as issues of concern," Egyptian Foreign Minister Sameh Shukri said at a news conference, describing the matter as "complicated and not easy."
Egyptian mediators have been shuttling between the delegations, and an Egyptian airport official said the Israeli delegation was back in Cairo Wednesday evening after flying out earlier in the day. He spoke on condition of anonymity because he was not authorized to brief reporters.
The Palestinian delegation is composed of negotiators from all major factions, including Hamas, and is meeting with Egypt's intelligence chief for briefings on Israel's demands.
"The most important thing to us is removing the blockade and start reconstructing Gaza," said Bassam Salhi, a Palestinian delegate. "There can be no deal without that."
He said the ceasefire, set to expire at 8 a.m. local time Friday , would likely be extended if more time for talks is needed. Shukri said that he hopes it would be extended.
The negotiations are still in the early stages, but the outlines of a possible solution have emerged, including internationally funded reconstruction of Gaza overseen by a Palestinian unity government led by Palestinian President Mahmoud Abbas. The Western-backed Abbas lost control of Gaza in the Hamas takeover of 2007.
In a step toward reconstruction, Norway is organizing a donor conference, tentatively set for the beginning of September.
Regarding easing the blockade, a statement by Egyptian intelligence indicated it would not agree to major changes at the Rafah crossing between Egypt and Gaza, and the onus of lifting the border closure would fall on Israel.
Egypt considers Gaza occupied by Israel and the country responsible for Gaza's other heavily restricted border crossings that lead into the Jewish State. Cairo also refuses to open its border fully as long as Hamas, not the Palestinian authority led by Abbas, controls the Gaza side of the terminal.
"Israel is the one that sealed all the crossings from the Israeli side and it doesn't allow commodities and goods or individuals to cross, aiming at besieging the strip and throw the whole responsibility on Egypt," the statement said.
The statement also took aim at Hamas, saying it was not permitting its own wounded population to cross into Egypt.
"The Palestinian party continued to put obstacles in front of the families, allowing only its foreign members to cross while barring its Palestinian members under the pretext that Egypt is barring them," it said.
Rafah is closed to commercial traffic and allows only individuals to cross, but Egypt has sharply restricted travel rights of Gaza residents over the past year and waiting lists have grown.
Speaking at his news conference, held with his Venezuelan counterpart, Shukri said talks are giving priority to the Israeli-controlled crossings and how to operate them to "meet demands of the Palestinian people."
Arrest made in killing of 3 Israeli teens
The ceasefire, in its second day, is the longest lull in a war that has killed nearly 1,900 Palestinians — 75 per cent of them civilians according to the United Nations. Israel has lost 67 people, including three civilians.
United Nations Secretary General Ban Ki-moon said on Wednesday that "the massive deaths and destruction in Gaza have shocked and shamed the world" and is demanding an end to "the senseless cycle of suffering" in the Israeli-Palestinian conflict.
"We will build again, but this must be the last time to rebuild," the UN chief told the General Assembly Wednesday. "This must stop now. We must go back to the negotiating table."
Ban said the UN understands Israel's right to defend itself from Hamas rockets but "the horror that was unleashed on the people of Gaza" raises serious questions about respect for international law that requires a distinction between civilians and combatants and proportionality.
UN human rights chief Navi Pillay told the assembly that "any attacks in violation of these principles .... may amount to war crimes."
The current round of confrontations began with the June 12 abduction-killing of three Israeli teens in the West Bank, which Israel blamed on Hamas before launching a roundup of hundreds of its activists, a move followed by barrages of Gaza rocket fire on Israel.
Israel launched airstrikes on July 8 it said were aimed at stopping the rocket fire before expanding the operation on July 17 by sending in ground forces to destroy a network of tunnels used to stage attacks.
On Wednesday, Israel's Justice Ministry said it had arrested Hussam al-Qawasmi, the suspected mastermind behind the killing of the Israeli teens, in July.
He allegedly led a three-man cell, all of whom were affiliated with Hamas. The militant group has not claimed any connection to the teens' abduction and killings.
People return to damaged homes
In Gaza, people took advantage on Wednesday of the calm to return to their devastated homes and inspect the damage.
People trickled back to their homes making their way over buckled roads, through dangling power lines and overturned trees to inspect their neighbourhoods. Along the way, rows of flattened buildings alternated with moderately damaged structures — and rare buildings with no damage.
CBC's Derek Stoffel spoke to several people returning for the first time to their former homes in the northern Gaza Strip close to the Israeli border. Their homes used to be part of a large apartment complex, he said, but all that remains now is rubble.
"You can see in the rubble that there’s clothes, there’s mattresses where people used to sleep," he said, standing in front of where the complex once stood. "People inside this building now trying to take whatever belongings they can to wherever they’re sheltering right now."
He spoke to one man who said his family will live in a tent while their home is being rebuilt. Already, a tent was being erected on the rubble site.
Many of the apartment complex's former residents told Stoffel that the Israelis were "vengeful" for attacking these buildings, he said, because no Hamas militants lived there.
Cars and donkey carts loaded with household goods and mattresses filled the streets and queues formed at banks as people waited to withdraw cash from ATMs.
Crews from utility companies worked frantically to repair downed electricity and telephone lines. Gaza's only power plant was shut down after it was badly damaged by an Israeli attack and repairs are expected to take months.
The densely populated strip now only has two to three hours of electricity a day which trickles in from Egypt and Israel.
In the northern Gaza town of Beit Hanoun, some expressed hope that the intensity of the destruction in this round of fighting — the third since Hamas took control of Gaza — would ratchet up enough pressure on the international community to find solutions to the territory's problems.
"The war was necessary to force the blockade to be lifted," said Mohammed Musleh, 27, as he surveyed his now uninhabitable third floor apartment damaged by the shelling. "I hope that this time there will be a really permanent solution for it."
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