The Palestinian prime minister has resigned after a simmering feud with the President Mahmoud Abbas.
Salam Fayyad leaves an economy in crisis and the government in disarray, just as the US was making a new push for peace in the Middle East.
"... Salam Fayyad has no legitimacy as everyone knows. He was not endorsed by the legislative council, and his economical policies created a great problem for the Palestinians ... When we formed the unity government the main argument to bring Salam Fayyad as a finance minister was he is the only one who can bring the money from outside ... although he is not accepted by ... most of the Palestinian organisations ... he acted in a way which created more problems than solving the problems for the Palestinians.”
-0sama Hamdan, head of international relations for Hamas
He was educated in the United States, and worked for both the World Bank and the International Monetary Fund. He has been credited with laying some of the groundwork for a future Palestinian state.
But during his time as Palestine's prime minister, Fayyad was facing problems over the handling of the economy, his strong stance against corruption, the extent of his authority, and a strained relationship with President Maumoud Abbas.
He served twice as Palestinian finance minister, before being appointed prime minister in 2007, following the take over of Gaza by Hamas.
He is admired in the West and even in Israel, with Haaretz newspaper once describing him as everyone's favourite Palestinian.
However the Palestinian Authority (PA) has been in crisis for months, public servants have not been paid, and there have been protests over price rises and tax hikes.
The US government has cut the amount of aid it gives the PA, Israel often delays transferring tax payments and Arab allies have failed to deliver promised assistance.
Outgoing finance minister Nabil Qassis forecast the PA's budget deficit for this year would reach $1.4bn. In 2005, it stood at around $800m.
"... he was considered to be very good financial manager and very good at combating corruption, somebody the West felt comfortable giving loans to … but he didn't have a base of support within the Palestinian political structure ... he was very good to run a technocratic administration, but he has really no independent political base to rely on when he comes into conflict with one or both of those groups."
- Richard Weitz, senior fellow an director of the Centre for Political-Military analysis
Latest figures from the World Bank showed economic growth slowed to a little over six percent last year, down from 11 percent in 2010 and 2011.
And Gross Domestic Product, the value of all goods and services, is expected to slow even more this year, to 4.7 percent in the West Bank and six percent in Gaza.
However, the tipping point for Fayyad came when his finance minister stepped down - Fayyad accepted his resignation but Abbas overruled him.
Politically independent, Fayyad was also vulnerable to pressure from the main Palestinian factions: Abbas' Fatah party, and Hamas, which governs Gaza.
And some saw him as an obstacle to reconciliation between the two groups.
Following the news of Fayyad's resignation was announced, Sami Abu Zuhri, Hamas spokesperson said: "Accepting the resignation of Salaam Fayyad has no relation at all with the Palestinian reconciliation agreement.
"It is related to the differences between Salaam Fayyad and the Fatah movement, and the Fatah movement demands to outcast him, which was obvious at the last Fatah revolution committee meeting," he said.
So are these irreconciliable differences? And what impact will Salam Fayyad's resignation have on the Israel-Palestine peace process?
Inside Story, with presenter Ghida Fakhry, discusses with guests:Ghassan Khatib, a former government spokesman under Palestinian prime minister Salam Fayyad; Osama Hamdan, head of international relations for Hamas; and Richard Weitz, senior fellow and director of the Center for Political-Military Analysis at the Hudson Institute.
"... Fatah has been recently critical of Salam Fayyad, and I think that Fatah has been trying to divert the public criticisms to the recent difficulties in the economic performance of the Palestinian Authority against Prime Minister Fayyad.
"The irony here is that this economic difficulties are not the responsibility of the government because there are very well known reasons for it and it has to do with the Israeli attitude of refraining to transfer the taxes, and the clear decline of the foreign aid to the Palestinian Authority ..."
-Ghassan Khatib, a former Palestinian government spokesman under Salam Fayyad