"I approved these proposals that meant in practice that hundreds of terrorists would be released, including some who killed Israelis. These proposals were rejected, no others will be offered to Hamas".

Failed talks

Two days of indirect talks in Cairo fell apart late on Monday, with Israel accusing Hamas of raising its demands.

"Hamas has not changed its demands at all, it has neither increased nor reduced them"

Osama al-Muzaini, a Hamas spokesman

However, Osama al-Muzaini, a Hamas spokesman, denied any change in the group's demands, and accused Israel of impeding the prisoner swap deal.

"The Israeli enemy is the one putting obstacles before the conclusion of this deal," he told Al Jazeera.

"Hamas has not changed its demands at all, it has neither increased nor reduced them.

"If they want this deal to be concluded, they have to accept the demands of the resistance either by the current Israeli government or by the next one ... we will not release [Shalit] until all our demands are met."

Olmert has made freedom for Shalit a pre-condition for a wider truce with Hamas.

The two sides declared separate ceasefires in January to bring Israel's 22-day assault on the Gaza Strip to an end, but a formal long-term arrangement has never been reached.

Shalit, now 22, was captured by fighters who tunnelled into Israel from Gaza and took him into the Hamas-ruled territory.

Hamas had reportedly demanded the release of 1,400 Palestinians held in Israeli prisons in exchange for Shalit, including some convicted of attacks that killed Israelis.

'Changed' debate

Critics argued a large prisoner swap for Shalit could encourage Hamas and others to try to capture more soldiers.

Israel holds around 8,000 Palestinian prisoners.

In regard to the wider ceasefire, Hamas demanded that Israel reopen the territory's borders, which have been under economic blockade for about 20 months.

Al Jazeera's Mike Hanna, reporting from Jerusalem, said Israel had changed the terms of debate last month by attaching Shalit's release to negotiations over a ceasefire.

"From Israel's point of view, it says that Hamas came up with new demands that it regarded as unacceptable. Hamas said it was standing by the demands it had been making over a period of time. Each side [is] attempting to put some form of spin on the situation," he said.

Olmert is in the final days of a three-year term marked by a 2006 Lebanon war that many Israelis see as a failure and the Gaza campaign that ended without achieving a complete halt to cross-border rocket fire.

Analysts say Olmert was hoping to secure Shalit's release to improve his legacy.