I am in Ramallah on the day of what could be a historic breakthrough in the Middle East peace process, and there is a palpable sense of excitement in the air.

Since the election victory of Hamas, the international community has refused to deal with the Palestinian government as Hamas refuses to even to recognise the right of Israel to exist. For some time, it has been suggested that a government of national unity would be a way around the deadlock, but until now negotiations between the main Palestinian parties had failed to produce agreement, partly as there was doubt that such a step would be sufficient for the international community to re-engage.

Tony Blair had arrived here one day ahead of us. I had fully expected to spend the next few days repeating his argument that, if they established a government of national unity, the international community would talk to it. In the event, within hours of his statement, such a government was agreed. The Palestinian legislators I met, including Hamas, had great expectations of this breakthrough, which includes an implicit recognition by Hamas of Israel.

Israel’s reaction is inevitably cautious and they are in the middle of an acute bout of self-doubt following the Lebanon conflict. But within hours, they released a number of Palestinian prisoners.

One curious aspect of all this from a British perspective is the very high esteem that both the Israelis and Palestinians have for Tony Blair. What a contrast with some people back home!