TEL AVIV -- Palestinian Prime Minister Salam Fayyad was expected to formally hand in his resignation Thursday night, but President Mahmoud Abbas, facing pressure from the United States to keep him from quitting, postponed the meeting, Palestinian sources said Friday.
Fayyad had offered his resignation in writing to Abbas following a rift between the two leaders over government policy and the handling of the economic crisis in the Israeli-occupied West Bank.
But during the G8 talks in London on Thursday, a State Department official said, "He is staying in his post, as far as I know."
"I think Abbas wanted to accept his resignation yesterday, but the surprise announcement to Mahmoud Abbas by the Americans was a strong message for Fayyad not to resign and a strong message to Abbas not to accept," said a source at Abbas' ruling Fatah party who did not want to be named because of the sensitivity of the issue.
Fatah is deeply critical of Fayyad, blaming him for unpopular economic policies – his proposed budget cuts and austerity measures have triggered widespread protests in the West Bank.
Fatah officials have even suggested that the president would be "happy" to see him go, while party officials "wanted him to leave a long time ago."
But Fayyad, a former World Bank official, enjoys wide support in the West – including in Washington, which is making coordinated efforts to revive Palestinian-Israeli peace negotiations and boost the struggling economy.
"I don't think Fatah realizes that Fayyad is the only Palestinian politician who enjoys wide support abroad from international donors," said a Western diplomat in Jerusalem who asked not to be named. The diplomat added that financial assistance could be halted abruptly if Fayyad exits the government because he has so much leverage with Washington, the Israelis and Europe.
Fayyad's institution-building drive in the West Bank had been "the single best thing" that had happened in the Palestinian territories in recent years, the diplomat said, adding that "the premier was also highly trusted by Israeli leaders."
A high-ranking European diplomat who did not want his name published told Reuters that Abbas had been under pressure to delay dealing with this resignation for at least two months to see how far the American initiative will reach.
Analysts said Fayyad's resignation would not have a direct effect on peace talks, but might impact the economic stability on which the process hinges.
"Fayyad never dealt with negotiations, security -- he only dealt with the economy," said Av Yissaharof, an Israeli analyst for Palestinian affairs.
"If the resignation is accepted, it will have an effect on the PA (Palestinian Authority) economy. Fayyad had excellent contacts and relations with Israel on the economy front and Abbas will be hurt due to Fayyad's excellent relationship with the West, and with the donors," he said.
But a Fatah official in the office of the president cautioned that any decision by Abbas to remove his prime minister would only occur with the dismissal of the entire government. He said the U.S. is "interfering with the PA" and wants to "limit Abbas' political role but underestimates his political influence."