Palestinian Authority President Mahmoud Abbas was forced this week to postpone the formation of a new government after members of his ruling Fatah faction threatened to openly revolt against him.
Abbas is also facing fierce opposition from many Fatah members over his decision to convene the faction's long-awaited sixth "general conference" in the West Bank on July 1.
Abbas's critics say that holding the parley in the West Bank would mean hundreds of Fatah members living in various Arab countries would not be able to attend the crucial meeting because of Israeli security restrictions.
The latest crisis in Fatah is regarded one of the most serious challenges to face Abbas since he succeeded Yasser Arafat in January 2005.
Abbas was originally scheduled to announce the new government on Tuesday, said Yasser Abed Rabbo, a former PA minister closely associated with the PA president.
The new government, Abed Rabbo said, was supposed to have been headed by Fayad, who has accepted Abbas's request to stay in office.
However, the announcement was postponed at the last minute until further notice after several Fatah officials and representatives accused Abbas and Fayad of excluding the faction from the new government.
The two have long been under heavy pressure to appoint Fatah officials to ministerial posts in the government. Fayad, who heads the independent Third Way list, has repeatedly turned down requests to form a Fatah-dominated government.
Fatah representatives said this week that it was "inconceivable" that the ruling and largest Palestinian faction should not be represented in any PA government. They are also upset with Fayad for denying them and their faction access to public funds.
In the past few days, Fatah-controlled media published various lists of Fatah "candidates" slated to serve as ministers in the new Fayad government. The publication of the lists was seen as an attempt by Fatah to exert pressure on Abbas and Fayad to establish a Fatah-dominated government.
On Tuesday, Fatah operatives in Ramallah discovered that the new Fayad government would include only one or two low-level representatives of their faction.
Senior Fatah officials who met with Abbas warned him that excluding them from the new government would result in an "intifada" against him and Fayad.
Fatah legislators, who held an emergency meeting in Ramallah, threatened to oppose the new government when and if it was presented to the Palestinian Legislative Council for a vote of confidence.
The Fatah legislators, backed by other officials from the faction, are now demanding that Abbas replace Fayad with a prime minister from Fatah.
"If the new government is going to consist of representatives of various Palestinian factions, then the prime minister must be from the biggest faction - Fatah," said Azzam al-Ahmed, chairman of Fatah's parliamentary list.
"If they ignore our demand, Fatah will act as if it's in the opposition because we wouldn't have any interest in the government."
He expressed outrage over the failure of Abbas and Fayad to consult with Fatah over the formation of the new government.
In another development signaling increased tensions in Fatah, several of its top officials have threatened to resign in protest against Abbas's decision to hold Fatah's sixth "general conference" in Bethlehem or Jericho. The conference is expected to pave the way for internal elections that are likely to see the rise of "young guard" activists at the expense of veteran old-timers.
Abbas's rivals in Fatah said they were opposed to holding the conference in the West Bank because Israel would almost certainly ban many delegates living in the Arab world from entering the PA territories. Most of the Fatah leaders living abroad, such as Farouk Qadoumi and Maher Abu Ghnaim, belong to the hard-line camp in the faction which opposes the Oslo Accords and any form of normalization with Israel.
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