Egypt's foreign ministry spokesman says Israel's demand that captured Israeli soldier Gilad Shalit be released before a long-term Gaza truce deal with Hamas is struck is a blow to Egyptian mediation efforts between the two sides.
Hossam Zaki says linking Shalit to the truce will "hinder any chances for a ceasefire."
Israel announced on Wednesday it would not open Gaza blockaded border crossings - a key Hamas demand - until Shalit is freed. The Islamist group, which controls Gaza, condemned the announcement.
Cairo has so far refrained from commenting on the cabinet's decision to set Shalit's freedom as a condition that could not be compromised on in the framework of any agreement with Hamas.
Amidst the diplomatic tensions, a visiting Egyptian delegation in Israel for routine quarterly discussions on Qualified Industrial Zones (QIZ) arrangements between Egypt, Israel and the United States – was ordered to return home at once.
Estimates are that the order comes as another signal to Israel that Egypt is displeased with the cabinet's decision. The foreign ministry said it was disappointed with Egypt's decision.
The ministry expressed its "sorrow" over Cairo's decision in a statement. "This is an economic meeting that is as much an Egyptian interest as it is an Israeli one. This decision sends a negative signal to Israeli, Egyptian and American businesses looking to promote trade between the countries. We are hopeful that the committee's discussions will soon be renewed."
Earlier on Thursday Prime Minister Ehud Olmert confirmed that Israel has handed over the names of hundreds of Palestinian prisoners it is willing to release in exchange for Shalit, names that were not on the original list demanded by Hamas. Olmert cited this development as progress in the efforts to secure
The new list includes hundreds of 'heavyweight' prisoners, jailed for lengthy terms for the planning and execution of terror attacks. Olmert reiterated once more that Shalit's release would have to precede any ceasefire deal.
"Anyone who thinks that by opening the crossings we'll resolve the issue of Gilad Shalit – is wrong. That just isn't true… it's inconceivable that after we crushed them (Hamas) we'll do what they demanded in the first place. If that's what they think, then they're wrong," Olmert said.
The Associated Press contributed to this report