JERUSALEM, Jan 7 (Reuters) - Israel said on Wednesday that talks were still underway with Egypt over a ceasefire proposal for the Gaza Strip despite French President Nicolas Sarkozy's announcement that the plan had been accepted by the Jewish state.

"We welcome the French-Egyptian initiative. We want to see it succeed," said Mark Regev, spokesman for Israeli Prime Minister Ehud Olmert.

But Regev added: "The talks continue on the basis of that initiative. A sustainable calm in the south will be based upon the total absence of hostile fire from Gaza into Israel and an effective arms embargo on Hamas that enjoys international support."

A Hamas official in the Gaza Strip also said that the Egyptian proposal was "still under discussion".

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