Once hailed by Western pundits as the technocrat-magician who would conjure a Palestinian state into being through irrepressible institutional competence, Salam Fayyad has been unceremoniously sidelined from his job as Palestinian Prime Minister according to a deal announced Tuesday -- a sign of the collapse of the illusions projected onto him, and of the peace process itself. Fayyad's ouster is expected to be a consequence of the reconciliation agreement between President Mahmoud Abbas' Fatah movement and the Islamist Hamas organization, that is to be sealed in Cairo on Friday. The two organizations have reportedly agreed to, next May, hold the first Palestinian elections since the 2006 poll won by Hamas. Until then, a unity government will run the Palestinian Authority in the West Bank and Gaza, but Abbas has reportedly been forced to concede to Hamas' demand that it not be headed by Fayyad.

Abbas had dragged his feet on the previous attempt at forming a unity government -- shortly before he lodged his bid at the U.N. for recognition of Palestinian statehood, which appears to have failed to garner sufficient support in the Security Council -- hoping to keep Fayyad in place because of the trust he enjoys among the Western donors on whom the Palestinian Authority remains heavily dependent.

But with his U.N. bid going nowhere and no negotiation option that he takes seriously on offer, Abbas appears to have bowed to pressure from the Palestinian public for the reconciliation to go ahead -- and that means letting Fayyad go, because Hamas refuses to accept him as Prime Minister. It's not that Hamas doubts Fayyad's administrative competence, or claims the job for one of its own on the ground that it won the last legislative election -- the job is likely to go to a technocrat acceptable to both movements. But while Fayyad is certainly a technocrat and a member of neither Fatah nor Hamas, the latter views him as a stooge of the West, appointed at the behest of the Bush Administration as part of its U-turn on Palestinian democracy that followed Hamas' 2006 election victory. Fayyad's role was to oversee the construction of an authoritarian West Bank administration capable of delivering on services and public safety, but also serving Israel's security needs. Despite its impressive administrative performance, Fayyad's tenure was predicated on the suppression of Palestinian democracy.

Democracy was no longer a concern of his Western boosters by the time Fayyad took office, and even the Israelis, welcomed the stability he brought to the situation on the West Bank and the limited economic growth he oversaw. Fayyad himself, let's be clear, always insisted he was simply putting in place the infrastructure of Palestinian statehood, ensuring that the administrative capacity for sovereignty was in place to make the case for statehood incontrovertible. A kind of "If you build it, they will come" model -- that left Gaza entirely out of the equation -- although he always made clear that statehood would have to be delivered through negotiations, or by the international community; the transformation could not be achieved under occupation.

But neither negotiations nor the intervention of the international community offers plausible hope for achieving statehood any time soon, and without a political agreement to end Israel's occupation, the institutional capacity Fayyad has built remains, essentially, the administrative infrastructure of the status quo.

The Palestinian leadership generation that has made the Oslo Peace Process its life's work has realized, belatedly, that the United States -- for domestic political reasons -- is never going to deliver a two-state agreement acceptable to the Palestinians. Hence their turn to the U.N. and towards an understanding with Hamas, and agreement to hold new elections next Spring. It's unlikely that those elections, if they go ahead, will reaffirm the current leadership and direction of Palestinian national politics. For one thing, Abbas insists he won't run again. Even if Fatah manages to prevail on him to run one more time -- the only other potential candidate in whom it could be confident to beat a Hamas presidential candidate is Marwan Barghouti, currently serving multiple life sentences in an Israeli prison on a terrorism conviction -- Abbas has clearly lost his way. Having declared the violence of the Second Intifada a self-inflicted strategic disaster for the Palestinians, Abbas built his presidency on the premise that the only way for Palestinians to achieve their national rights was through patient negotiation under U.S. auspices, relying on Washington to pressure Israel into concessions in the absence of any Palestinian leverage in the negotiation process. The failure of that strategy has negated Abbas' political purpose: The U.N. bid -- handled more as a gesture of desperation than as part of a clear political strategy -- may well have been his last roll of the dice. That, too, has failed, with aggressive U.S. diplomatic intervention handing Prime Minister Benjamin Netanyahu an epic political victory, and extinguishing any residual faith in the U.S. to deliver the minimum needed by the Palestinians.

So, if there is to be an election next year, its central issue will be the need to develop a new national strategy. Abbas recognized long before many of his peers did that "armed struggle" was a disastrous strategic cul-de-sac that played to Israel's strengths and set back the Palestinian cause. But relying on U.S.-led diplomacy has played to another of Israel's strengths, because of its overwhelming support within the American political system. That route, too, has exhausted itself. Right now, even the future of the Palestinian Authority is under a cloud as leaders debate whether to dissolve it -- after all, if it's not the administrative infrastructure of a new state because no new state is on the horizon, then it's simply the administrative infrastructure of the status quo, i.e. a form of Palestinian self-government while under Israeli occupation. The PA's role as the major employer on the West Bank may militate against dismantling it. But there's a growing realization among many Palestinians that changing the status quo requires leverage that creates a downside to the status quo for Israel -- a leverage that the strategies of the past, whether negotiations or terror attacks, have failed to achieve. The latest Fatah-Hamas unity announcement coincided with a day of non-violent protest on the West Bank, with six activists styling themselves "freedom riders" boarding buses bound for Jerusalem, which they're restricted from entering. They were taken off the buses and arrested before entering the city. It was a small symbolic human rights protest, consciously mimicking the tactics and symbolism of the American Civil Rights movement of the 1950s. Whether or not this particular tack grows into a significant movement, it's another sign that growing numbers of younger Palestinians are no longer waiting around for the completion of the "peace process", but are taking their fate into their own hands, inspired by the tactics of the Arab uprisings. Indeed, if an election goes ahead next May (and that's always a big "if") and provides the occasion for a mass public conversation on strategies for ending the occupation, it may turn out to be the Palestinian iteration of the "Arab Spring."