If the PA collapses so do the Palestinian security forces that have been keeping order in the West Bank as Israel has continued to plunder Palestinian land and resources
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We have been here many times before. However, on this occasion even the principal actors understand that the Palestinian Authority is not crying wolf as it warns of imminent collapse.
The crisis is entirely of Israel and Washington's making. Keen to pander to hawkish public opinion in the run-up to last month's election, Israel's Prime Minister Benjamin Netanyahu struck a severe blow against Mahmoud Abbas and his government-in-permanent-waiting.
He announced that Israel would withhold a portion of the taxes it collects on behalf of the Palestinians, and which it is obligated under the Oslo accords to pass on to the PA, based in the West Bank.
The money deducted is the sum the PA transfers as stipends to the families of political prisoners and those killed and maimed by the Israeli army.
This is an incendiary issue, as Netanyahu well knows, given that Palestinians view these families as having made the ultimate sacrifice in the struggle to liberate their people from brutal Israeli occupation.
Abbas cannot be seen to back down, and so has refused to accept any of the monthly tax transfers until the full sum is reinstated, amounting to nearly two-thirds of the PA's revenues.
Given how precarious Palestinian finances are, after decades of resource theft and restrictions on development imposed by Israel, the PA is already on the brink of bankruptcy.
The problem for Netanyahu and Washington is that the PA was established under the 25-year-old Oslo accords to take the pressure and costs off Israel of policing the Palestinian population under occupation.
If the PA collapses, so do the Palestinian security forces that have been keeping order in the West Bank as Israel has continued to plunder Palestinian land and resources.
Late last month the United Nations warned that the standoff had left the PA facing "unprecedented financial, security and political challenges".
Which means that, despite his recent electoral triumph, Netanyahu is in a serious bind.
He cannot be seen by his even more rightwing coalition partners to be climbing down and restoring stipends to people Israelis view simply as "terrorists".
Equally, he dares not risk a Palestinian uprising in the West Bank. That would be a real possibility if the Palestinian economy implodes and there are no Palestinian security forces to suppress the resulting wave of popular anger.
A preview of the difficulties in store was given at the weekend, when more than 600 rockets were fired out of Gaza, threatening the cancellation of the Eurovision song contest in Israel later this month.
By Sunday evening, four Israelis were reported dead, while 20 Palestinians had been killed by Israeli airstrikes. The Palestinian fatalities included two pregnant women and a toddler.