RAMALLAH, West Bank (Reuters) — In a reversal aimed at ending protests that have swept the West Bank, the Palestinian Authority announced Tuesday that it had canceled recent tax increases. But a union leader rejected the concession and said street demonstrations would continue.

The protests are being watched with growing concern by Israel, which fears that the Palestinians’ frustration with their leadership will snowball into a third general uprising against the Israeli occupation of the West Bank.

Thousands of youths attacked a police station in Hebron on Monday night, calling for the dismissal of Salam Fayyad, prime minister of the Palestinian Authority, who is struggling to keep the economy afloat in the face of a slowdown in foreign donor aid and continued Israeli trade restrictions.

Government employees, many of whom will receive only part of their August salaries because of a government cash crisis, also staged a strike on Tuesday, and hundreds of them picketed a government cabinet meeting.

“We’re doing the best we can, and we have been all along,” Mr. Fayyad said after announcing that his government was scrapping most of the increase in fuel and diesel taxes that were put in effect at the beginning of this month, setting off the unrest. A sales tax had also been increased.

“I hope that the Palestinian citizens could look at this situation, in light of the unique hardships we face, and will find it sufficient,” he added. “It represents the maximum, most intensive effort to get to a solution.”

The head of the Palestinian public transport union promptly rejected the move and promised more protests, saying fuel prices were too high even before the recent increase.

“These decisions are unsatisfactory, and we will continue in our protests,” said the union leader, Jawad Omran.

Out of cash and bound by economic accords that peg its sales tax to steep Israeli rates, the Palestinian Authority is struggling to salvage its legitimacy in the eyes of the public, and officials have blamed Israel for its economic woes.

Mr. Fayyad said that the lost revenue would be made up by cutting high-end government salaries and scaling back the operations of some ministries, but that only donor aid could pay the bills in the short term, pending greater economic independence for the Palestinians.