A civilian revolt and the collapse of Mr Yasser Arafat's authority in Gaza over recent days are unmistakable signs of a political crisis triggered by Israel's decision to withdraw from the territory next year.
Mr Arafat's reinstatement yesterday of the man he sacked on Saturday in favour of his cousin as security chief, and the refusal of the Palestinian Prime Minister, Mr Ahmed Qurie, to withdraw his resignation in protest against such "unprecedented chaos" deepen the impression of terminal decline.
Any temptation for the Israeli government to say we told you so is tempered by their realisation that an implosion of Palestinian authority will profoundly affect Israel too. Some talk of a civil war between the factions struggling for power in Gaza.
Those involved include a well-organised fundamentalist group around Hamas, who believe in an all-out confrontation with Israel rather than a negotiated peace leading to a two-state outcome. Mr Arafat's own support base, held together by nepotism and corruption as well as long-standing loyalties, is strongly challenged by reformist groups. The outbreak of street protests in favour of reform is welcome and unprecedented; but it was accompanied by kidnappings and shooting incidents which hint at a more sinister outcome.
At issue is who will control Gaza when the Israeli occupying troops and settlers leave, as it now looks more and more likely they will do next year. Both the Israeli opposition and the international Quartet trying to restart negotiations are putting conditions on any decision to leave, so that withdrawal would be linked with commitments to a resumed peace process. Talks between the Israeli Prime Minister, Mr Ariel Sharon and the Labor opposition are now under way. If a grand coalition is formed attention will turn to who it would negotiate with on the Palestinian side.
The Israeli public supports a negotiated outcome based on a two-state solution, according to successive opinion polls, notwithstanding their sympathy for Mr Sharon's use of force against the Palestinian intifada. There has been an ambivalent attitude towards settlements and a general welcome for the Gaza withdrawal. A new grand coalition would be in a strong position to drive negotiations and carry Israeli opinion with it.
In the light of these events Mr Arafat is facing what could be a terminal battle to hold on to power. The alternatives to him are a group still committed to a two-state solution but determined to establish a reformed and accountable administration; or a sea change in which an Islamic group much more hostile to such an outcome controls Palestinian society. Either way surrounding states have a real interest in the outcome. Israelis will come to regret the relentless pressure they have put on the Palestinian population and leadership over the last four years, which has led to this collapse of authority. If a peaceful settlement is to be reached there must be the political and social space to rebuild civic capacity in Gaza and the West Bank.