Jerusalem - Negotiations on a last-minute prisoner exchange between Hamas and the outgoing Israeli government have broken down, Israel announced overnight.

Outgoing Israeli premier Ehud Olmert, who has held intense, Egyptian-mediated indirect negotiations with Hamas in a bid to reach a deal during his final days in office, issued a statement, charging Hamas had "hardened its position," "reneged" on understandings that had already been formulated over the past year and "raised extreme demands."

Olmert convened his cabinet in early Tuesday afternoon, to brief his ministers on the negotiations.

Hamas however denied it had hardened its positions and charged the Israeli announcement was a bid to buy more time and pressure it.

Olmert's office made the announcement after two representatives, Shin Bet internal security agency director Yuval Diskin and negotiator Ofer Dekel, returned from Egypt late Monday and updated him on the results of the marathon talks of the past days.

Dekel Tuesday morning briefed the family of Israeli Corporal Gilad Shalit, held captive in Gaza since June 2006. The family has set up a protest tent outside Olmert's residence, where they said they would for the time being remain.

Olmert's claims "are untrue lies," Khalil Abu Laila, Hamas' foreign relations chief, said earlier. "Hamas' stance has not changed since the first moment the Zionist soldier was captured," he told reporters in Gaza.

"Through these statements, the Zionist entity tries to gain more time and put more pressure on Hamas in a bid to get concessions from Hamas," Abu Laila added.

Abu Laila said the indirect negotiations had not ended, adding matters would become more clear after the Israeli cabinet meeting.

Hamas is demanding more than 1,000 Palestinian prisoners in exchange for Shalit, and has insisted on selecting the names of the first 450 of them. They are said to include "hardcore" militants involved in some of Israel's worst suicide attacks.

Hamas and Israel are conducting indirect negotiations via Egyptian intelligence chief Omar Suleiman because they do not recognize each other. (dpa)