GAZA, June 12 (Nidal al-Mughrabi/Reuters) - Differences sharpened on Sunday over implementing a Palestinian reconciliation deal after the Fatah movement nominated Prime Minister Salam Fayyad to head a unity government and the Hamas Islamist group rejected him.

It is certain that we will not accept Fayyad, neither as a prime minister of the unity government nor as a minister in it, senior Hamas official Salah al-Bardaweel said, two days before scheduled talks with Fateh in Cairo on cabinet staffing.

At a meeting late on Saturday, Fateh's Central Committee, the secular movement's highest decision-making body, named Fayyad, an internationally respected former World Bank economist, as its candidate for prime minister.

Supporters of Fayyad say his standing abroad is an asset to the Palestinians in ensuring the continued flow of international aid and in pursuing a bid for U.N. statehood recognition in September.

But Israel has said the reconciliation agreement signed in April is an obstacle to reviving U.S.-sponsored peace talks with Western-backed President Mahmoud Abbas of Fateh, whose forces lost control of the Gaza Strip to Hamas in fighting in 2007.

Under the unity deal, Hamas and Fatah agreed to set up an interim government of technocrats, or ministers who are not members of any political movement, in the run-up to elections within a year.

Israeli Prime Minister Benjamin Netanyahu has called on Abbas to tear up the agreement with Hamas, which has rejected Israeli and Western demands to recognize Israel, renounce violence and accept existing interim peace deals signed by the Fateh-led Palestine Liberation Organization in the 1990s.

Bardaweel accused Fayyad of cooperating with Israel's blockade of the Gaza Strip. He said that Fayyad, as prime minister, shared responsibility for the arrest of Hamas leaders and members in the West Bank in recent years.

Hamas had expressed opposition in the past to Fayyad's leadership but at least one senior official in the group has been quoted as saying it would examine the idea of his continued service as prime minister.

Asked whether Hamas's rejection of Fayyad would hinder reconciliation, Bardaweel stopped short of declaring the deal dead but he cautioned against any cabinet nomination that would be seen by any side as a provocation.

Jamal Mhesen, a Fateh Central Committee member, said Fateh wanted a prime minister who could attract international support -- a leader whose job would be to end the blockade of Gaza, not to cause a blockade in the West Bank, too.

(Additional reporting by Ali Sawafta in Ramallah; editing by Mark Heinrich)