By Joshua Mitnick /

Salam Fayyad at a press conference in Brussels, April 2011.
Salam Fayyad at a press conference in Brussels, April 2011.
TEL AVIV—Palestinian Prime Minister Salam Fayyad will leave office, opening up a leadership vacuum at a time when the U.S. is trying to restart peace negotiations and the Palestinian government is grappling with a financial crisis.

Mr. Fayyad resigned Saturday and Palestinian President Mahmoud Abbas accepted his resignation. Media speculation of his imminent departure had been swirling since Thursday.

Mr. Fayyad, a former International Monetary Fund economist who is admired by Western governments, is credited with pushing wide-ranging reforms to prepare for Palestinian statehood.

Mr. Fayyad’s contention that the Palestinians could put the institutional building blocks in place for independence despite the restrictions of Israel’s military occupation earned him praise from Palestinians as well as Israelis, who frequently likened him to David Ben Gurion, the founding prime minister of the Jewish state.

He instituted fiscal transparency after years of mismanagement of billions of dollars of foreign aid, and overhauled Palestinian security forces to restore law and order in West Bank cities after internal chaos reigned during the second Palestinian uprising a decade ago.

But the success of Mr. Fayyad, a political independent, spurred friction with politicians in Mr. Abbas’ Fatah party as well as the president himself. Many Fatah politicians disagreed with some of his decisions and many considered him a potential rival, according to analysts.

“This is a dramatic development,” said Ghassan Khatib, a former government spokesperson under Mr. Fayyad. “His resignation is creating a lot of worries among the Palestinians, because his leadership was associated with improving the financial performance of the Palestinian Authority, and its credibility…Many people are worried that his absence might lead to a deterioration.”

Last month, U.S. President Barack Obama singled Mr. Fayyad for praise during a presidential visit to the region. Last week, Secretary of State John Kerry visited the region and said that the U.S. would push an economic package for the Palestinians as a way to spur growth and improve the environment for a resumption of the long stalled peace talks.

The resignation is a reminder of how absence of progress on political negotiations imperils the standing of reform-minded technocrats, said Daoud Kuttab, a Palestinian journalist and political analyst.

Mr. Fayyad’s “uniqueness clearly has a time limit and without any breakthroughs, the vultures of the political parties (mostly Fatah here) were relentless in attacking Fayyad.”

Mr. Fayyad served as prime minister for nearly six years, ever since Hamas overran the Gaza Strip and Mr. Abbas reconstituted as government in the West Bank by appointing Mr. Fayyad.

During negotiations between Fatah and Hamas on reconciling their rift through the creation of a national unity government, Mr. Abbas insisted Mr. Fayyad remain as prime minister even though he was opposed by Hamas, which had criticized the prime minister for fostering cooperation between Israeli and Palestinian security forces against Islamists in the West Bank. Mr. Fayyad offered to step down rather than be an obstacle to a reconciliation, but Mr. Abbas didn’t accept.

Recently, tension has been escalating. In the fall of 2012, Palestinian government decisions to raise taxes and eliminate some subsidies prompted antigovernment unrest and strikes, with many of the pro-Fatah protesters and union members accusing Mr. Fayyad.

The prime minister has also been grappling with a fiscal liquidity crisis brought on by a shortfall of donor aid and Israeli economic sanctions, forcing the government to institute irregular salary payments. Amid the difficulties, Mr. Fayyad accepted the resignation of the Palestinian finance minister, Nabil Kassis, even though the president wanted the pro-Fatah politician to stay.

Criticism from Fatah officials of the prime minister grew sharper in recent weeks, prompting Mr. Fayyad to insist on resigning, said a Palestinian official.

A statement from the official Palestinian news agency Wafa on the resignation said that Mr. Abbas asked Mr. Fayyad to remain as the head of a caretaker government until a new one is formed.

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