Palestinian Prime Minister Ahmed Korei will stay in his post for now but did not formally withdraw his resignation during a crisis cabinet meeting today, a senior Palestinian official said.
Negotiations Minister Saeb Erekat said President Yasser Arafat and Mr Korei were still at loggerheads three days after Mr Korei tendered his resignation in frustration over unprecedented unrest in Gaza.
Palestinian Prime Minister Ahmed Korei
Mr Korei has demanded that Mr Arafat cede more security control to him.
"President Arafat insists on rejecting the resignation," Mr Erekat said after the cabinet session in the West Bank city of Ramallah. "Abu Ala (Korei) insists on resigning. The crisis goes on."
A senior official close to Arafat had said earlier that Mr Korei had rescinded his resignation.
Palestinian sources said Mr Korei, a leading moderate, is pressing MrArafat to clarify what if any powers he is willing to relinquish before deciding whether to remain prime minister.
Mr Arafat so far has paid lip-service to reforms and has been reluctant to implement them.
He is now scrambling to defuse a leadership crisis prompted by a weekend of violent protests in the Gaza Strip spearheaded by gunmen demanding anti-corruption measures.
Street protests and kidnappings were sparked when Mr Arafat appointed his cousin as head of security ahead of an imminent withdrawl of Israel from the Gaza Strip.
Mr Arafat backed down yesterday and reversed the appointment. Two Palestinians were injured in an Israeli missile attack on the Shati refugee camp on the outskirts of Gaza City.
It was the second strike in less than one day that targeted the house of Abu Youssef al-Quka, head of the local Popular Resistance Committee, in Shati refugee camp on the outskirts of Gaza City.
Medics said the two wounded people were treated for shrapnel injuries while a third person was treated for shock at a local hospital.
This morning's attack is the second in two days after the two-floor house was targeted by another Israeli helicopter strike yesterday afternoon, injuring three people.
It was not immediately clear whether Abu Youssef had been injured in either attack.
The Israeli strikes were the latest in a series of raids against suspected militants in the Gaza Strip.