Palestinian PM Exit To Spark New Peace Fears

The resignation of Palestinian Prime Minister Salaam Fayyad, which Sky sources have confirmed is imminent, threatens to undermine American-led efforts to rekindle the peace process with Israel amid hectic shuttle diplomacy by John Kerry.

The US Secretary of State has twice met Israeli, Palestinian and regional leaders in the Middle East over the last three weeks and is now in London, where he will be briefing G8 foreign ministers on the US initiative set off by President Barack Obama during his April tour of the Holy Land and Jordan.

Mr Fayyad, a technocrat with no political affiliations, is seen as key to the Palestinian Authority's much-improved record on tackling corruption, reducing violence, and drastic improvements in administration.

He has repeatedly clashed with Fatah, the dominant political force on the West Bank which was founded by the late Yasser Arafat and is led by Palestinian president Mahmoud Abbas.

A source close to the prime minister said: "Fayyad has resigned before and it was rejected by the president.

"This time he is adamant. He could not have gone in the previous months because he would have been leaving a sinking ship but now that the finances of the Palestinian Authority are more secure he will go."

He is expected to hand in his letter of resignation when President Abbas returns from a meeting with the Arab League's Peace Committee in Doha, Qatar.

His last quarrel with Mr Abbas was over the resignation of the finance minister Dr Nabil Kassis which he accepted, but which was then overruled by the president.

"He simply cannot and will not continue in office to be constantly sniped at and undermined by Fatah," a source close to him said.

Palestinian politics is always fractious. Such local dramas rarely attract the interest of the outside world.

But this time the consequences of his resignation have wider implications.

A senior Western diplomat told Sky News: "The single best thing that has happened in the last few years is the Fayyad agenda of state-building … Fayyad's departure would have serious implications on relations with the international community.

"It is hard to overstate how important Fayyad has been.

"The Israelis trust him, even some senior quite hawkish Israelis."

He had been expected to go sooner but agreed to stay on after Israel suspended the transfer of tax revenues to the Palestinian Authority which almost crippled its ability to function.

Those transfers have now been restarted - and the Palestinian budget is in place.

Mr Kerry's efforts have been focused on trying to get talks going to end the occupation based largely on a Saudi peace plan dating back to 2002.

As part of the plan Israel would withdraw to the Green Line that separated the Jewish State from Palestinian territories until the Israelis seized it in 1967.

In return 57 Arab and Islamic states would agree to normalise diplomatic relations with Israel, which many have refused to recognise at all.

The US Secretary of State's efforts have assumed an air of urgency. British Foreign Secretary William Hague believes that the opportunity for a successful outcome is rapidly vanishing.

Israel's position, most strongly articulated by Prime Minister Benjamin Netanyahu has been that there is no "partner for peace" on the Palestinian side.

Diplomats agree that the Palestinians have agreed to suspend their campaign against Israel within UN bodies and the International Criminal Court for 12 weeks to give Mr Kerry a chance of getting talks off the ground.

The Israelis are believed to have similarly slowed or suspended the creation of new illegal Jewish settlements on the West Bank.

But if, as expected, Mr Fayyad goes, a vital and trusted link to the Palestinian leadership would be broken - which could send the peace process back into a deep coma.

The US and European Union can be expected to put Mr Abbas under heavy pressure to somehow hang on to his prime minister.