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Palestinian Prime Minister Salam Fayyad submitted his resignation today in a move that could help usher in a power-sharing deal between Western-backed President Mahmoud Abbas and his rivals in the militant group Hamas. Fayyad's resignation was meant to be a goodwill gesture toward the militant group. However Hamas officials dismissed his resignation, arguing his appointment has been unconstitutional.

Foreign Minister Avigdor Lieberman on Monday declared that Israel would not stand by idly should Palestinian Prime Minister Salam Fayyad go ahead with his stated plan to declare a de-facto state within two years.

Fayyad said last week that the Palestinian Authority intends to establish a de-facto state by 2011, despite failing peace talks. We have decided to be proactive, to expedite the end of the occupation by working very hard to build positive facts on the ground, consistent with having our state emerge as a fact that cannot be ignored," Fayyad told the Times of London. "This is our agenda, and we want to pursue it doggedly."

Israel has agreed to give the Palestinian security forces more freedom of action in four West Bank cities, Israeli and Palestinian security officials said Thursday, a move that implies a reduction in Israeli military activity in those areas as the Western-backed Palestinian forces assert more control.

The Israeli military also recently removed several significant checkpoints inside the West Bank, in line with a policy of easing movement and improving daily life for the Palestinians so long as calm prevails. A Palestinian can now drive from Jenin in the northern West Bank to Hebron in the south without being stopped and checked at any permanent roadblock along the way, the military says.

Palestinian officials said that the Israeli measures did not go far enough. The prime minister of the Palestinian Authority, Salam Fayyad, told reporters in the West Bank city of Ramallah on Thursday that they did not meet Palestinian expectations, and that “what is required is a full cessation of military raids in Palestinian Authority areas.”

Rival Palestinian factions are to meet in Cairo, at the start of a process they hope will pave the way for a national unity government.

Divisions between the two main groups - Fatah and Hamas - are making rebuilding Gaza in the aftermath of Israel's military campaign there more difficult. While internationals donors have pledged billions of dollars to the reconstruction of Gaza, they are not willing to deal directly with Hamas, which is widely viewed as a terrorist organisation.

On Saturday, Palestinian Authority Prime Minister Salam Fayyad resigned ahead the power-sharing talks, a move that is intended to pave the way for the formation of a national unity government.

Hosting the German foreign minister this week, Prime Minister Benjamin Netanyahu used an especially tainted term to condemn the Palestinian demand that Israel's settlements in the occupied West Bank be removed. "Judea and Samaria cannot be Judenrein," a Netanyahu confidant quoted him as telling Frank-Walter Steinmeier. Asked how Germany's top diplomat responded to hearing the Nazi Holocaust term for areas "cleansed of Jews," the confidant said, "What could he do? He basically just nodded."

Asked how Germany's top diplomat responded to hearing the Nazi Holocaust term for areas "cleansed of Jews," the confidant said, "What could he do? He basically just nodded."

Hence the jaw-dropper defiance of "Judenrein," which the confidant said Netanyahu had encouraged cabinet colleagues to deploy in their defense of the settlements and of Israel's insistence that Palestinians recognize it as a Jewish state.