The defense establishment is of the growing opinion that Hamas and Fatah will not succeed in joining forces and creating a unity government and that, in the end, terror and anarchy will continue to thrive within the Gaza Strip, The Jerusalem Post has learned. The defense establishment believes that even if abducted IDF Cpl. Gilad Shalit is returned, Hamas will continue to reject the three conditions the Quartet set for Hamas to obtain international recognition - a cessation of terror attacks, the recognition of Israel's right to exist, and the acceptance of previous agreements between Israel and the Palestinian Authority. "There will not be a unity government," a senior defense official who monitors the PA said this week. "Hamas is pulling the PA in a radical direction, and Fatah wants to pull things in a moderate direction. The two will not be able to get along together." However, EU officials based in Jerusalem said they expect the formation of a national unity government before the end of September. "[PA President Mahmoud] Abbas and [Prime Minister Ismail] Haniyeh are very close to reaching an agreement," they said. "The two men have an interest in forming such a government because it would strengthen the position of each of them. According to the officials, who have been holding regular discussions with Abbas's aides and senior PA representatives, there is a very good chance that Fatah and Hamas would be able to strike a deal some time in September. "Abbas's office has informed us that he is determined to do his utmost to reach an agreement with Hamas, especially in the wake of the latest crisis in his Fatah party," said one EU representative. The US has high hopes for the establishment of a unity government in the PA, which it believes could be the key to a renewal of dialogue between Israel and the Palestinians. "We hope there will be changes on the Palestinian side in the coming weeks and months," a high-ranking US diplomat said this week. "A national unity government within the PA could be that change." According to the Israeli defense official, the disagreements between Hamas and Fatah over the distribution of the government portfolios would also in the end thwart the creation of a unity government. "It won't happen," the official said. "Instead, there will be a deterioration in the situation, including more terror attacks against Israeli targets." The defense establishment is of the opinion that there will not be any major diplomatic breakthroughs between Israel and the PA and that Gaza will continue to be controlled by Hamas terrorists and begin to resemble southern Lebanon, which is controlled by Hizbullah, as predicted by Shin Bet (Israel Security Agency) chief Yuval Diskin this week. If the situation continues to deteriorate and weapons from Egypt continue to be smuggled almost freely into Gaza, Israel might be left with no choice but to conquer the Gaza Strip, another official said.