CAIRO (Reuters) - Palestinian groups say they will reach an agreement today on a formal halt to attacks on Israelis, a step President Mahmoud Abbas hopes will persuade Israel to pull back from Palestinian towns.

The Palestinian Authority and Egypt, which is hosting the meeting of several Palestinian factions, including Hamas and Islamic Jihad, want them to agree to an open-ended period of "calm", an Arabic term for the lowest level of truce.

"We have an agreement in our hands now from all factions on the 'calm'," Samir Mashharawi, an official from Abbas's Fatah movement, told Reuters on Thursday.

Mashharawi said radical militant groups were still holding out for setting a time limit on the truce, but another official said he expected the differences to be settled within hours.

The talks are the broadest between Palestinian factions for years, thanks to high-level representation of groups based in Damascus and opposed to the Palestinian Authority's policy of seeking a negotiated settlement with Israel.

Israel pulled back from the West Bank town of Jericho on Wednesday, launching a process to turn over a total of five towns to the Palestinian Authority, as agreed at a February 8 summit between Abbas and Israeli Prime Minister Ariel Sharon.

Abbas and his Fatah group have been trying to persuade Hamas and Islamic Jihad that the calm is bringing results, both in practical measures by Israel and in political and economic help from the international community.

FINAL COMMUNIQUE IN HOURS

"Within hours there will be a final communique. The difference is over the time frame but both parties will reach a settlement," a senior militant official said.

Islamic Jihad, the main opponent of an open-ended ceasefire, says that a truce is possible only if Israel meets demands including prisoner releases and Israeli withdrawal from Palestinian areas.

"Islamic Jihad will not accept an open truce and it will have the right to respond to any Israeli attacks if the Israelis do not stick to their commitments," their representative Anwar Abu Taha told Reuters on Thursday.

A de facto truce has been in place since February, but militant groups have not made any formal commitment. Israel said this week it could not agree to a Palestinian ceasefire which did not give up the "terror option".

A senior militant official said on Wednesday that in the talks outside Cairo both Hamas and Islamic Jihad had agreed on extending a period of "calm".

The militants say they do not want to give Israel an extra "free gift" by making the ceasefire open-ended.

Abbas has been trying to draw Hamas and Islamic Jihad into the political process, rather than disarm them by force in a confrontation which could lead to civil war.

Public support for Hamas is on the increase and last week it announced it was ready to take part in parliamentary elections, another step in the movement's gradual evolution.

Reuters