There is also the danger, from Israel's point of view, that if Abbas's PA collapses, the void in the West Bank will be filled by his Hamas rivals, who run Gaza. Israel has been delighted to keep the Palestinian territories divided under feuding Fatah and Hamas leaderships.
A way out or a change of tack is urgently required.
Israel has tried twice to quietly make partial tax transfers to the PA's bank account, in the hope the money would be accepted. The PA returned it.
Then, the European Union stepped in. Ostensibly an "honest broker", it appears to be occupying a role the Trump administration has formally abandoned. The EU proposed last week that the PA accept the transfers on a "provisional basis", until the crisis can be resolved.
PA officials were dismissive. "Let the people take to the streets," one said. "We have our backs to the wall." The PA line is that in the current climate, if it backtracks, Israel will simply intensify unilateral measures harming the Palestinian cause.
So now, more in desperation than any realistic prospect of achieving peace, attention is turning to Donald Trump's long-promised "deal of the century".
After endless delays, the US administration now seems to be preparing for its release next month, soon after the holy month of Ramadan finishes.
The plan's main architects, Trump's son-in-law Jared Kushner and his Middle East envoy Jason Greenblatt, have issued a spate of statements hinting at the contents.
Greenblatt has sought to reassure neighbouring Egypt and Jordan that they will not shoulder the burden. He discounted rumours either that Gaza's Palestinians would be encouraged to move to the Sinai, in a land swap that would allow Israel to annex parts of the West Bank, or that Jordan would find itself recast as an alternative Palestinian homeland.
Kushner, meanwhile, has strongly suggested that the goal of a two-state solution, implied by the Oslo process, will finally be jettisoned. "New and different ways to reach peace must be tried," he has said.
He has also stated that the plan will stress "economic benefits" for the Palestinians and "security" for Israel.
David Friedman, Trump's ambassador to Israel and a stalwart ally of Israel's most extreme settlers, has recently added that Israel will maintain security control of the West Bank.
According to analysts, these statements suggest the White House is preparing the ground for an offer to the Palestinians of "limited autonomy" an outcome Arab officials confirmed to The Washington Post.
Sensing the danger, 40 former senior European officials have signed a letter opposing any plan that creates a Palestinian "entity devoid of sovereignty, territorial contiguity and economic viability".
"Limited autonomy" would be a reformulation of Israel's long-running ambition to thwart permanently Palestinian hopes of statehood a policy the late Israeli academic Baruch Kimmerling once termed "politicide".
Since the late 1970s, the Israeli right has advocated hemming Palestinians into enclaves where they are denied sovereignty.
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