Palestinian Prime Minister Salam Fayyad on Tuesday stressed that municipal elections would be carried out to pave the way for legislative and presidency elections.

"The local municipal and village councils must be elected and their authority should be rotating," Fayyad said during an inauguration ceremony in Ramallah.

He added that elections are a key part of his two-year plan to upgrade national institutions to be ready for a possible declaration of a Palestinian statehood next year.

Fayyad also said he believes the municipal polls would be the first step towards the parliamentary and presidency elections.

Fayyad's government decided to hold local elections in July despite the rejection from Islamic Hamas movement which controls the Gaza Strip.

Hamas and President Mahmoud Abbas's Fatah party are locked in a fierce power struggle. As a result, Abbas' term as president and Hamas' term in the parliament had expired in January but the two parties ruled out elections due to their differences.

Meanwhile, Fayyad said he was encouraged by the Quartet, which comprises the United States, the European Union, Russia and the United Nations, for its support for his state-building plan during their meeting in Moscow last month.

He added that the international community must intervene directly to press Israel to end its occupation of the West Bank and East Jerusalem.

Last month, Israel approved a plan to build 1,600 houses for Jews in East Jerusalem, thwarting a fresh U.S. initiative based on holding indirect proximity talks with the Palestinians.