Fayyad to stay on as PA prime minister - for now

Palestinian Prime Minister Salam Fayyad, who has submitted his resignation to President Mahmoud Abbas, will stay on until a new government is formed, Palestinian officials said on Monday.

The former World Bank economist tendered his resignation on March 7, effective March 31, in order to help rival Palestinian factions to reach a deal on an interim government.

But aides to Abbas say the prime minister could be persuaded to remain in the post.

"We are waiting the return of the president. He (Fayyad) and the government will remain until the president decides what he wants to do," Minister of Economy and Telecommunications Kamal Hassouni told Reuters after the weekly cabinet meeting.

Abbas is currently in Qatar attending a two-day Arab summit that started on Monday. He is expected to return to the occupied West Bank this week, after the March 31 deadline.

"The government could stay on for several weeks or even months," a Palestinian official said.

Palestinian groups - mainly Abbas's dominant Fatah faction and its arch-rival, the Islamist Hamas group - are to resume negotiations on a possible unity government on April 1 in Cairo, after adjourning an inconclusive round of talks on March 19.

Analysts say it is unlikely Abbas will make changes to Fayyad's government in order to create a positive atmosphere for Cairo talks.

Diplomats say Fayyad - who says he won't reconsider resignation - has grown increasingly frustrated both by a lack of progress in peace talks with Israel and by opposition within Abbas's secular Fatah faction to his control over the Palestinian Authority's purse strings.

Samir Abdallah, Minister of Planning, said Fayyad's meeting with his 15 ministers on Monday was the government's last session.

Abbdallah said that Abbas may ask Fayyad, whom he appointed in the West Bank after Hamas Islamist routed Abbas forces in Gaza Strip in 2007, to form a new government or reshuffle the existing one, or choose another premier.

"But asking another (to be a prime minister) would be the least likely scenario," Abdallah said.

Hamas Islamists who control the Gaza Strip have called Fayyad's government "illegitimate" and "unconstitutional" and have accused him of doing Washington's bidding.

Hamas won a 2006 Palestinian election but its government was shunned by Western powers for refusing to recognize Israel, renounce violence and abide by interim peace deals with the Jewish state.