Fayyad Quits as Palestinian Premier After Tension With Abbas

Palestinian Prime Minister Salam Fayyad, the International Monetary Fund economist who sought to create a stable foundation for statehood, today submitted his resignation, which was accepted by President Mahmoud Abbas.

Fayyad, 62, will continue in his post until Abbas assembles a new Cabinet, according to a text message from the official Palestinian news service Wafa in Ramallah. The two leaders met late today at the Muqata government compound in Ramallah, where Fayyad handed Abbas his letter.

The move follows the resignation last month of Finance Minister Nabil Qassis and Fayyad’s repeated warnings that the government’s economic situation is “unsustainable.” The IMF said in a March 15 report that the Palestinian Authority’s ability to govern was being undermined by its financing difficulties.

“There was a lot of tension with Abbas, but Fayyad’s resignation actually preserves the status quo,” said Khalil Shaheen, director of the Masarat Center for Policy Research in Ramallah. Since Fayyad will stay until a cabinet is assembled, “this could go on for a week, a month or even two years,” Shaheen said.

Fayyad met this week with Secretary of State John Kerry, who returned to the Middle East to follow up on President Barack Obama’s visit in late March. After talks with Israeli Prime Minister Benjamin Netanyahu in Jerusalem, Kerry said he is working on a plan to promote economic development in the West Bank and improve the atmosphere for peace talks.

Rebuilding Relationship

The Obama administration is seeking to rebuild a relationship with the Palestinians that soured over Abbas’s bid to secure statehood through the United Nations. After U.S. pressure scuttled a 2011 Security Council resolution recognizing Palestine as a state, the General Assembly voted to give it the status of a non-member observer state last year.

Abbas appointed Fayyad as prime minister in 2007 after a five-year stint as finance minister. Fayyad’s experience at the IMF provided credibility in negotiations with the U.S., the European Union and other countries that led to billions of dollars in donations for the Palestinian Authority.

After years of arguing that Israel must ease restrictions on the movement of people and goods to strengthen the Palestinian economy, Fayyad presented a plan in 2009 to build governing institutions aimed at insuring the future stability of a Palestinian state.

Banker Fischer

Israeli President Shimon Peres has compared Fayyad’s nation-building to the actions of Israel’s first premier, David Ben-Gurion, who helped build the institutions that then became the infrastructure of the Jewish state. The Palestinian prime minister said he often consults with Bank of Israel Governor Stanley Fischer, a colleague from his days in Washington at the IMF, where he worked from 1987 to 2001. Fayyad earned his doctorate in economics from the University of Texas at Austin.

The World Bank said in a March 12 report that the Palestinian economy has become less competitive as agricultural productivity has been cut in half and manufacturing stagnates. The share of exports in the economy dropped to 7 percent in 2011, among the lowest in world.

To contact the reporters on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net; Fadwa Hodali in Bethlehem at fhodali@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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