Palestinians accelerated their drive toward statehood recognition at an international meeting in Brussels Wednesday, but it comes amid worry that Middle East unrest may further complicate prospects for peace by altering the regional landscape.

With peace talks with Israel already mothballed, Palestinians are pursuing a United Nations vote on statehood in September – a goal that seems more likely after foreign donors heard upbeat endorsements of the Palestinian Authority's (PA) ability to govern a sovereign state.

But others say the rising tide of Arab unrest could work against both the PA and Israel. For the PA in the West Bank, demonstrations in the region could spur protests against the lack of political progress, such as the five-year absence of elections or the failure of peace negotiations. It is missing an important ally due to instability in Egypt, which had significant sway over Hamas militants in the Gaza Strip.

Israel, too, lost a strategic partner with the fall of Hosni Mubarak, who was considered a key part of the Middle East peace-making architecture.

Israeli cabinet minister Dan Meridor criticized the Palestinian rush for international recognition but he also urged Israeli Prime Minister Benjamin Netanyahu to come up with an initiative to restart peace talks.

"Time is not playing positively for us or them," he said, noting the regional push for domestic reform exposes the Palestinian leadership in Ramallah to demands by Hamas for institutional reform that could give the Islamic militants' new power bases. "We need to do something."

In Brussels Wednesday, Palestinian Prime Minister Salam Fayyad told donor nations, which have contributed billions to PA, that "the building blocks of a modern state ... are now in place."

In the past week, the PA has been praised as ready for independent rule in reports prepared by the UN, the International Monetary Fund, and the World Bank. In particular, the IMF noted decreased dependence on aid and increased budgetary transparency.

But concerns are mounting in Israel about a destabilization along its border with the Hamas-controlled Gaza Strip.

Israeli analysts are blaming two rounds of flare-ups in less than a month on the fact that Mr. Mubarak is no longer applying pressure to the Islamic militants through their shared border. While Egypt is focused on elections and a corruption investigation of the Mubarak regime, Hamas has launched more provocative attacks on southern Israeli cities, officials said.

Israel is also worried that the unrest will leave a vacuum for Iran to fill, bolstering Tehran’s Hezbollah allies in Lebanon who could fire rockets on Israel.

While Arab unrest has not spread to the West Bank, the PA is watching it closely. Young Palestinian demonstrators have so far called for ending the political rift between Hamas and Fatah.

But if diplomatic efforts fail to produce tangible progress toward a Palestinian state, PA President Mahmoud Abbas could face calls to resign. He has already pledged not to run again in upcoming – albeit overdue – elections. Palestinian observes say that by raising hopes for statehood soon, the PA could be inviting a wave of protests.

"What I am afraid of is that people will have high expectations in September," says Munther Dajani, a political science professor at Al Quds University in Jerusalem. "Then nothing will happen, and then it will explode."