Hillary Clinton starts her first tour of the Middle East as Secretary of State today with a mandate to reinvigorate collapsed peace talks.

She will find, however, that support for a two-state solution – the central plank in US-led efforts to tackle the crisis for almost two decades – is at a record low.

Not only is it waning on the Israeli side, which is under the new leadership of the right-wing hawk Binyamin Netanyahu, but it is also collapsing among Palestinians, who increasingly view the Oslo peace process, and the Palestinian Authority (PA) that was formed under it, as dead.

Palestinian officials and civil leaders told The Times that their governing body was all but defunct and would either waste away or turn into a kind of Vichy regime providing a cover for Israel’s continuing occupation of the West Bank. Many Palestinian civil leaders believe that time is running out for a two-state solution, thanks mainly to increasing Jewish settlement activity and Israel’s refusal to relinquish military positions.

Some Palestinians even said that if Israel did not soon agree to statehood, the Palestinians should abandon dreams of independence and confront the Jewish state with its worst nightmare – a one-state solution, in which Arabs would, in decades to come, outnumber Jews. “Oslo is dying and so of course is the Palestinian Authority,” said Mustafa Barghouti, an independent politician and head of the increasingly popular Palestinian National Initiative. “They are transforming the authority into a security subagent for Israel. It’s becoming a Bantustan government, a Vichy,” he said.

“The PA is a house with nothing inside,” said Qaddura Fares, a veteran Fatah member and former MP. In an attempt to establish the PA as a credible government, senior British and US army officers have been seconded to train the Palestinian Authority’s security forces, once made up of former Palestine Liberation Organisation (PLO) forces who had fought for years alongside Yassir Arafat and returned with him from exile in the 1990s. Billions of dollars have been pumped into the PA, money that its many critics say has made its leaders rich while doing little to improve the economy, which has been crippled by Israeli closure and restrictions on movement in the West Bank.

“The PA is wasting away,” said Diane Bhuttu, a Palestinian political analyst and former legal adviser to the PLO. “It’s not going to collapse because that would entail active measures on behalf of the international community and Israel, and because there’s still so much money coming in from donor states.”

The authority of the PA leader, Mahmoud Abbas, the Palestinian President and Fatah head known popularly as Abu Mazen, was rapidly diminishing, she said. “Palestinians are asking, ‘Is this really the only strategy we have, just to negotiate and negotiate?’ If you add Bibi [Netanyahu] to the mix, then it is not just a question of not believing in Abu Mazen, but questioning the utility of the PA.”

Mr Netanyahu has avoided committing himself to continued negotiations on a two-state solution, offering instead what he calls an “economic peace”, whereby Israel would retain security control of the West Bank, allowing the PA to administer its towns. In return he would try to offer Palestinians more jobs and better conditions.

Ali Jarbawi, a professor of political science at Bir Zeit University in Ramallah, said that Israel wanted to give the Palestinians a “state of leftovers”. While the former US President George Bush warned of the dangers of a “Swiss cheese” – a West Bank sliced up by Israeli settlements and military zones – Mr Jarbawi said that what was on offer was “a bunch of grapes”, isolated cities and cantons connected by single roads or even tunnels.

He warned that if Israel refused to grant full Palestinian statehood in the West Bank and Gaza it would be in the Palestinians’ interest to dismantle the PA. “If the Palestinians are to remain under military occupation, what’s the point in having an authority? If we remove this façade of the PA, Israel will be in trouble,” he said.

If Palestinians lived under Israeli rule – as they did for decades before the Oslo accords in the early 1990s – they would eventually demand equal rights inside a greater Israel that included the West Bank, Mr Jarbawi said. That would mean the end of a strictly Jewish state. “If we get rid of the PA, we are heading down the road of the one-state solution,” he said.

Growth of settlements

— In 2007 UN reported that almost 40 per cent of West Bank was covered by Israeli infrastructure. 450,000 Israelis living alongside 2.4 million Palestinians in West Bank and East Jerusalem

— Citing Israeli defence ministry figures, Human Rights Watch said settler population in West Bank and East Jerusalem grew 5.5 per cent in year to August 2008 and is four times what it was decade ago

— Ariel Sharon encouraged civilians to settle in the territories after the 1967 war because military installations could be removed by subsequent governments

Sources: United Nations Office for the Coordination of Humanitarian Affairs; Times archives