Gaza: Hamas signalled a willingness on Wednesday to negotiate over the list of Palestinian prisoners it wants Israel to release in exchange for a captive Israeli soldier, but ruled out major changes.

Israeli leaders brushed aside the list submitted by Hamas, which leads the Palestinian government, because it includes many militants deemed to have "blood on their hands" for attacks against Israelis.

But the Israeli government stopped short of rejecting the list outright and said it wanted to continue negotiations through Egyptian mediators in a bid to secure the release of Corporal Gilad Shalit, who has been held by militants in Gaza for 10 months.

"It is patently clear that these will be tough and complicated negotiations," Israeli Defence Minister Amir Peretz said.

Palestinian cabinet spokesman Ghazi Hamad said a deal was "doomed to fail" if Israel demanded that militants with "blood on their hands" were dropped from the list.

"This proves that Israel is not interested in achieving a compromise over the release of prisoners," Hamad said."But if there are issues that want more negotiations, then things are not over yet."

Israeli Prime Minister Ehud Olmert held his first discussions about the prisoner list on Tuesday with Peretz and his top security advisers. Israeli ministers at the meeting expressed "disappointment and reservation" about the list, the prime minister's office said.

Shalit was seized last June by militants from Hamas and two other armed groups who tunnelled into Israel from Gaza.