In his weekly cabinet meeting, Netanyahu said that there was no deal on a German-mediated prisoner exchange that could lead to the release of Israeli soldier Gilad Shalit seized by Gaza militants more than three years ago.

"We're not nearing a breakthrough today or tomorrow on the issue of Gilad Shalit," Netanyahu said.

"We're committed to his return as soon as possible, but the recent reports are unsubstantiated and, beyond that, there is a lot of exaggeration and inaccurate information," a senior official quoted Netanyahu as saying, according to news agency AFP.

German report on imminent deal

The comments follow a news report to be published by German news magazine Der Spiegel on August 31 which said that Israel had accepted a German-mediated swap.

The report follows days of speculation in the Israeli press that the involvement of German mediators in recent months had led to progress in arranging an exchange of Shalit for several hundred Palestinian prisoners.

A senior Hamas official Osama al-Muzeini, who handles the Shalit case for Hamas, told a pro-Hamas Web site that there were still "some phases" which had to be worked out to make the deal happen. He also criticized the media reports, saying that all the talk on the subject was adversely affecting the situation.

Egyptian President Hosni Mubarak first revealed news of German involvement in the negotiations for a prisoner swap during a trip to Washington earlier this month.

The Mubarak government has been unsuccessfully brokering indirect negotiations for months.

German role in prisoner swaps

Der Spiegel said Shalit would be released in exchange for 450 prisoners. At a future date, Israel would release hundreds more Palestinian detainees as a humanitarian gesture with no time limit, the report said.

Gilad Shalit was seized in a cross-border raid on June 25, 2006 by Palestinian militants including from Hamas. The only communication from him has been an audio tape that Hamas released a year after he was taken.

It is not the first time that Germany has been involved in negotiations like these.

In 2004 Germany brokered a deal between the Israelis and Hizballah in Lebanon. In that situation, the remains of three Israeli soldiers and an Israeli businessman were exchanged for more than 400 Arab prisoners.

av/dpa/AFP
Editor: Sonia Phalnikar