The Palestinian Prime Minister Salam Fayyad has resigned, after a long-running dispute with President Mahmoud Abbas.

Official Palestinian news agency Wafa said the president accepted Mr Fayyad's resignation after they met in person.

But he asked him to remain as caretaker until a new government is formed.

A BBC correspondent says Mr Fayyad's resignation is a major blow for US efforts to restart the long-stalled peace process with Israel.

His resignation is the climax of long-running and increasingly bitter dispute between the prime minister and the president.

They have been at odds over economic policy since Finance Minister Nabil Kassis quit last month, and rumours were rife that Mr Fayyad would step down.

Mr Fayyad accepted Mr Kassis's resignation, but he was subsequently overruled by Mr Abbas, effectively challenging the prime minister's authority to hire and fire cabinet ministers.
International credibility

Mr Abbas reportedly waited several days before accepting Mr Fayyad's resignation.

It comes despite recent attempts by US Secretary of State John Kerry to reconcile the two men.

The BBC's Wyre Davies in Jerusalem says Mr Fayyad was seen as a key person in US attempts to restart peace negotiations with Israel.

President Abbas may now struggle to replace him with someone who can match his level of international credibility, our correspondent says.

He is expected to name a new prime minister within days.

Mr Fayyad, 61, has been prime minister of the Palestinian Authority since 2007.

He is considered a liberal and politically independent, being a member of neither Mr Abbas's Fatah party, nor of rivals Hamas, who control the Gaza Strip.

A former International Monetary Fund official, he is also widely respected among international organisations and donors.

BBC