The agreement on a Palestinian national unity government coincides with a new push for peace in the Middle East by the European Union.
By Kirsty Hughes
Writer on European affairs
This week EU foreign ministers are looking for ways to expand funding to the Palestinian Authority.
Last week German Chancellor Angela Merkel went on a four-day tour of Egypt, Saudi Arabia and some of the gulf states.
Chancellor Merkel has been working the phones and travelling
Germany holds the EU's rotating presidency, and is hoping to harness Ms Merkel's growing stature as the EU's most influential leader, in the twilight days of both Tony Blair and Jacques Chirac.
Officials and politicians in Berlin say she is assiduously working on what she sees as the two big issues at the heart of the crisis in the Middle East - Iran, and the Israeli-Palestinian conflict.
She has been particularly active, they say, since the war in Lebanon last summer, pursuing a relatively quiet but intensive diplomatic strategy and "working the phones" to all the key players.
Cautious but upbeat
A senior official says: "We have been involved in trying to calm things... and Merkel was pushing the US to have the quartet meeting, and we got that commitment in January, so now it's important that it continues."
He emphasises that Germany "will welcome any agreement that leads to more peace and stability in the Palestinian community," while emphasising that any agreement must be assessed to see if it meets the Quartet aims on recognition of Israel and an end to violence.
On the other hand, he says Germany has no illusions about the extent of its influence.
"We just say we are in the [EU] presidency and have to contribute and do what we can," he says.
So the mood in Berlin is cautious but nonetheless somewhat upbeat on the outlook for the Middle East.
A leading member of the German Bundestag foreign affairs committee, Karl-Theodor zu Guttenberg says "one of the most interesting developments is the role of Saudi Arabia - it's quite clearly changing."
Saudi Arabia hosted the talks between President Abbas and Hamas in Mecca, which led to the agreement on the national unity government, and took steps to ease tensions in Lebanon last month.
And on Israel and the Palestinians he says: "You can feel there is an attempt to see a possibility of a new initiative. I think the US is trying... they are interacting very intensively with Germany as the EU presidency and also as the key [European] player at the moment."
Like others in Berlin, Guttenberg talks of whether Bush might "do a Clinton" and use the deadline of the end of his presidency at the end of 2008 to push - more successfully than Clinton - for a new peace deal.
But prospects for progress on Israel-Palestine are overshadowed not only by the bloodshed in Iraq but by the ongoing confrontation with Iran over its nuclear plans.
The senior German official argues that the US and Europe both see Iran very clearly as a threat: "Iran wants to get the nuclear bomb, I have no doubts, they just have to assess how high is the price, so our effort has to be to raise the price."
But he says the US and EU do differ for the moment on how far to push sanctions, and the legal base for such a move.
"The Americans would like to have gone more quickly ahead in financial sanctions beyond the [UN] Security Council but it needs a legal base," he says.
"The EU has gone a bit beyond [the UN resolution] 1737, but there is a limit to what you can do going beyond  without a legal base. But we do need to be ready to tighten the screw and go to the Security Council."
Despite recent ratcheting up of American rhetoric against Iran, and the deliberate build-up of US naval forces in the region, the view, or at least the hope, in Berlin is that US military action is unlikely.
Karl-Theodor zu Guttenberg says he thinks the US wants to do everything to avoid going down a military route, but adds he is worried by "the strident tone we hear at the moment".
"I question how helpful it is to send aircraft carriers into the Gulf region," he adds.
He points to the possibility of a "reaction out of fear by other countries in the region".
If the US's harsh tone is one complicating factor, in his view, another is the continued unpredictable behaviour of the Russians.
"Even the Chinese are more helpful at the moment than the Russians," he says.
The worst thing the international community can do, he points out, is to "raise the ability of the Iranians to find tiny rifts and widen them between us."
Mr Guttenberg agrees with Angela Merkel's emphasis on the twin issues of Iran and Israel-Palestine, but he sees a "living paradox" in the interconnections between them.
"You have got to have unbelievable amounts of patience on Israel-Palestine... but you can't afford patience when you talk on Iran," he says.
Whether Germany's EU presidency can help get the balance right is for now an open question.