Burning issue ... a young demonstrator prepares to throw a tyre during a protest against the high cost of living near Ramallah.
Cities across the West Bank are in the grip of mass protests as taxi drivers, teachers, shopkeepers and other Palestinian workers joined a strike to protest against fuel price rises and the ongoing financial crisis that is crippling the Palestinian Authority.
Threats of cuts to the electricity supply to large areas of the West Bank over at least $US125 million ($120 million) in unpaid bills are contributing to rising tensions, with protesters from Nablus to Ramallah and Bethlehem to Hebron calling on the Prime Minister, Salam Fayyad, to resign over the government's economic failings.
The Palestinian Authority President, Mahmoud Abbas, backed his embattled Prime Minister on Saturday and blamed Israel for restrictions that he said hampered an effective response.
Mr Abbas said that he bore ultimate responsibility for government policies and that he had asked Mr Fayyad and the cabinet to meet with representatives of the public to examine ways to lower the cost of living.
Speaking at a news conference called at his headquarters, Mr Abbas said the Palestinian Authority was facing a cash crisis because of a shortfall in donor contributions, particularly from Arab states, and he warned that civil-service employees would not receive full salaries this month.
After growing at an average of 7 per cent a year in 2009, 2010 and last year, the economy has hit the wall, with some economists saying growth could be as low as 3 per cent to 4 per cent this year.
Unemployment is at an unmanageable 57 per cent, with a new report from the United Nations Conference on Trade and Development released this week estimating one in two Palestinians were living in poverty.
The poverty rates were worst in East Jerusalem, which is under Israeli administration, sitting at an estimated 78 per cent, the report found.
''The impact of [Israel's] occupation on the Palestinian productive base, especially the agriculture sector, has been devastating,'' the UN report found.
''The economy has lost access to 40 per cent of West Bank land, 82 per cent of its ground water, and more than two-thirds of its grazing land. In Gaza, half of the cultivable area and 85 per cent of fishery resources are inaccessible.''
Under the Paris Protocol of 1994, created as part of the Oslo Peace Agreement to establish interim economic relations between Israel and Palestine, Israel collects taxes on behalf of the Palestinian Authority - currently about $US120 million a month - and controls Palestinian trade through land, air and sea ports.
The Palestinian Authority is reliant on foreign aid because of these restrictions and the continued expansion of Israeli settlements onto Palestinian land
, says Ghassan Khatib, an academic at Birzeit University and until recently a senior spokesman for the authority.
''We have witnessed a gradual decline in foreign aid, and that gradual decline is causing an accumulated deficit,'' Dr Khatib said.
''We were dealing with it through borrowing from banks and later through indirect borrowing from the private sector ... however, we have exhausted these two methods.''
The Palestinian Authority is waiting for the US Congress to approve a request by the President Barack Obama's administration to release $US200 million in aid, while only half of the $US1.1 billion in pledges from the Gulf states had been received, he said.
In June, the Palestinian Monetary Authority, the equivalent of the central bank, issued a statement announcing that the government could no longer borrow from banks because it had reached its limit, Dr Khatib said.
And in an indicator that the Palestinian Authority had also reached its limit with the private sector, the Union of Contractors said it would no longer bid for any contracts issued by the Palestinian Authority and stop all the infrastructure projects already under way because of the amount of money they are owed, he said.
Add to that, the authority is struggling to pay the wages of its employees, affecting 153,000 teachers, nurses and other public sector workers who in turn cannot pay their bills, Dr Khatib said.
''The rate of unemployment is increasing, the percentage of poverty is increasing and this is the direct outcome of the crisis.''
Over the past two months, Mr Abbas has issued a gloomy assessment of the situation: in addition to the financial crisis, the peace process with Israel has stalled and reconciliation between the authority and Hamas is going nowhere.
''The combination of an economic crisis and a political crisis is very explosive,'' Dr Khatib said.
''For the Palestinian leadership to be unable to deliver to its people on any front is very dangerous.''
Unrest is growing throughout the West Bank and Gaza - last week Khaled Abu-Rabee, a 42-year-old father of 10 from Al-Farraw refugee camp near Hebron, attempted to self-immolate, while in Gaza 21-year-old Ihab Abu Nada died after setting himself alight. Both were desperate after not being able to find employment
, the Maan news agency reported.
''The status quo is unsustainable,'' Dr Khatib said. ''The PA might collapse, confrontations with Israel might be renewed, not necessarily military confrontations but non-violent confrontations, this is a very complicated reality in which we live.''
Reiterating his intention this month to seek a UN General Assembly vote to upgrade the Palestinians' status to that of a non-member observer state, Mr Abbas linked the Palestinian Authority's financial woes to US-led efforts to head off the UN initiative.
with The Washington Post