Following the understandings reached at the end of last week between Defense Minister Shaul Mofaz and his Palestinian counterpart Mohammed Dahlan, the Palestinian Authority's security chief began making phone calls to Islamic Jihad and Hamas leaders.

Dahlan tried to convince the senior militants to do all they could to prevent terror attacks against Israel, thus preserving his achievements in his meetings with Mofaz, namely the transfer of security control of four West Bank cities, including Ramallah, to PA security control.

Everyone made promises to Dahlan, yet the deadly suicide bombing in Jerusalem on Tuesday night is proof that they did not keep their word. Tuesday's attack, the first such incident since the declaration of the hudna (cease-fire) at the end of June, marks a personal failure for PA Prime Minister Mahmoud Abbas (Abu Mazen) and for Dahlan himself.

At the end of last week, defense and political sources had expressed a slim, momentary hope that appeasing the PA would yield results. But the attack proves once more that the cease-fire is fake. It now looks as if the voices may of those who warn that a terror-state may be established alongside Israel grow strong, and that this outcome must be prevented despite its inclusion in the road map.

Generally speaking, it is not important which of the terror groups was responsible for the attack. Whether it was Islamic Jihad - according to an anonymous spokesman speaking on Hezbollah's radio station, Fatah's Tanzim gangs, or Hamas.

The territories are teeming with activity, and despite the hudna, large amounts of cash are being transferred to bribe people into carrying out terror attacks.

Iran is using Hezbollah in Lebanon to transfer funds that reach Islamic Jihad and Fatah militants; funding also finds its way to those organizations from those close to PA chairman Yasser Arafat, who in effect controls (directly or indirectly) Tanzim's operational apparatus.

Arafat controls the funds that arrive unchecked from Europe. Dahlan's preventive security organization also uses the funds, for the purpose of preventing terror attacks. The Palestinian security minister is getting financial support himself, likely from the American administration, which he uses to buy off Fatah bands and their leaders and pay for their guns, thereby taking them out of the circle of terror.

This deterioration in Palestinian society - which maintains only an extremely thin layer at its top that is called the "Palestinian Authority" - strengthens those who think that it is impossible to control what happens in the territories. A similar deterioration occurred when the Palestinians started the civil war in Lebanon, and the same happened when they caused large-scale clashes in Jordan.

In light of Tuesday's terror attack, it seems that the Israeli leadership will do everything in its power not to move on to the implementation of the second stage of the road map, in the course of which a Palestinian state is to be established prior to the sides negotiating the final settlement issues.

Yet even before this question is addressed, the government and defense establishment will have to deal with the question of Israel's reaction to the attack.

Israel has faced similar situations in the past, after the attack on a discotheque on Tel Aviv's seaside promenade in June 2001 and at Netanya's Park Hotel during Passover 2002, as well as after other deadly attacks.

These terror attacks were carried out prior to the declaration of the hudna. The immediate temptation in Israel will surely be to embark on a large-scale military operation, yet the solution does not lie there; it looks as if a series of responses will be carried out, rather than a single large-scale move.