This is a risky business because it frightens the Israelis as well as his Palestinian opponents.

When Fayyad first unveiled his plans in August, U.S. President Barack Obama's administration gave it the green light and deposited $200 million into the Palestinian Authority's treasury, which Fayyad controls.

The United Nations and the Europeans also gave the nod to what the Jerusalem Post calls "the first serious Palestinian outline of a state-building effort since the PLO was founded in 1964."

The blueprint outlined by the Western-backed Fayyad, a former World Bank economist who has been premier since June 2007, replaces the traditional Palestinian position of armed struggle to liberate Palestine and seeks to establish a state within the borders that existed before the June 1967 war.

But for David Bedein, director of the Center for Near East Policy Research in Jerusalem, Fayyad's plan for a Palestinian state with the disputed holy city of Jerusalem as its capital "reads like a declaration of war, not of peace."

He echoed the horror of many Israelis at the prospect of a Palestinian state in the West Bank, known to Israelis as Judea and Samaria, which ultra-Orthodox hardliners consider to have been given by God to the Jews.

Dan Diker and Pinhas Irbani of the Jerusalem Center for Public Affairs argue that Fayyad's plan contravenes the 1993 Oslo peace accords by incorporating areas still under direct Israeli control, such as the high ground around Jerusalem and overlooking Israel's Mediterranean coast within the envisaged Palestine state.

"A unilateral declaration of Palestinian statehood would be unacceptable to Israel," they wrote in an analysis. The plan "creates serious legal and security concerns for Israel."

"Fayyad's strategy to enlist U.S. and international support for his unilateral steps to pressure Israel to withdraw to the pre-1967 lines could very well backfire.

"Far from building the foundations of a Palestinian state, a unilaterally declared state that claims the pre-1967 lines as its border could end up thrusting Israel, the PA and other regional actors into a storm of instability, and possibly armed conflict."

Fayyad, who was brought into the Palestinian Authority as finance minister by Yasser Arafat in 2002, has always been outside the power elite of Arafat's Fatah movement.

He has long been at odds with Abbas, the archetypal Arafat apparatchik. But U.S. support for Fayyad's efforts to pull the beleaguered PA back from the brink of collapse prevented Abbas from moving against him.

It dominated Palestinian politics for four decades. It has lost much of its influence since Arafat died in November 2004 but remains mired in corruption and the now-discredited philosophy of armed struggle.

The PA president, Mahmoud Abbas, Arafat's successor, had failed to make any headway toward a peace agreement or Palestinian statehood.

Widely discredited, particularly since he failed to exploit a U.N. report accusing Israel of war crimes in Gaza last winter, Abbas has said he will not run for re-election in January.

That threatens to split the Palestinians in the West Bank, magnifying the bloody rivalry between Fatah and Hamas that led to the fundamentalists seizing Gaza by force in June 2007, effectively fracturing the putative Palestinian state.

Fatah officials in the West Bank, perceiving Abbas' political demise as a pointer to their own future, have accused Fayyad of staging a "bloodless coup" against the hapless Abbas with the support of the United States, the Europeans and some Arab countries.

It's no secret that the Americans and others have long viewed Abbas as a political dinosaur with no power to realistically deal with the Israelis, particularly since Hamas took over Gaza.

Abbas' allies in Arafat's Old Guard have launched a major campaign for him to run again in the forthcoming elections.

But with nearly two decades of peace efforts and nothing to show for it, Fayyad has taken the bull by the horns by seeking to, as he puts it, employ Israeli tactics by "changing facts on the ground," regardless of whether any progress is made in peace negotiations.

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