The Palestinian Authority is on the verge of financial collapse — and that’s not just a problem for Palestinians. It is also bad news for the United States and Israel, both of which say they support a future Palestinian state. Unrest is spreading in the West Bank over high prices and delayed salary payments by the Palestinian Authority, the area’s largest employer. Economic woes add to mounting frustration after four years of stalled peace talks.

The authority’s budget shortfalls can be attributed to the financial crisis in Europe, which hit major donors, and to the failure of Arab governments to make good on pledges. If Saudi Arabia, which claims to support the Palestinian cause, were more reliable with its payments, other Arab countries would follow suit. But the US Congress is also to blame for cutting off payments following Palestinian Authority President Mahmoud Abbas’s first bid for statehood at the United Nations last year. Secretary of State Hillary Clinton restored some, but not all, of these funds.

On Thursday, speaking before the UN General Assembly, Abbas renewed his call for recognition as a state. The United States and Israel oppose the move, because it would allow the Palestinians to use the UN system to further their cause, rather than negotiatiate with Israel. But members of Congress calling for more cuts in funding to the Palestinian Authority are shortsighted.

Notably, Israel itself wants to avoid the Palestinian Authority’s collapse. Since its creation by the Oslo Accords in 1993, the Palestinian Authority has taken over much of the heavy lifting of governing Palestinians in the West Bank, including reining in protests and arresting terror suspects. Israeli deaths from Palestinian terrorism have declined steadily, even as attacks by Israeli settlers on both Palestinians and the Israeli military have dramatically risen.

But so far, the Palestinian Authority has little to show for its cooperation with Israel. Settlements continue to expand on land that Palestinians hoped would become their state. In the Arab neighborhoods of East Jerusalem, where Palestinians hoped to build their capital, settler groups are building housing and institutions for Jewish Israelis in an attempt to prevent it from becoming part of a future Palestinian state.

Abbas’s West Bank could have provided a vibrant, prosperous contrast to life in the Gaza Strip, which is ruled by Hamas, a militant group that advocates violence against Israel. Instead, economic growth in the West Bank continues to be stymied by restrictions on the movement of Palestinian goods and people. Area C — the largest and most fertile part of the West Bank — remains under complete Israeli control, and Palestinians are not allowed to build factories, mines, or farms there without permission. Private investment will never flow freely under such restrictions.

Even so, Israel should be commended for taking steps to prevent the Palestinian Authority’s financial collapse. The Israeli government, which controls all borders, has offered advances on customs duties that it collects on behalf of the Palestinian Authority. It has also issued thousands of additional permits allowing Palestinians to work in Israel and approved new infrastructure projects in Area C.

But these measures are temporary solutions for a problem that has dragged on too long. The Palestinian Authority was meant to provide partial self-government for an interim period until a Palestinian state could be achieved. Now frustration is running so high that some Palestinians are calling for the body to be dissolved, which would make Israel financially responsible for the well-being of Palestinians in the West Bank. Such voices should be careful what they wish for. That would be a terrible step backward.

But Israelis who are holding out for Israel to permanently control as much territory as possible — including East Jerusalem and Area C — should also be careful what they wish for. If current trends continue, whatever land is left to form a Palestinian state will be too small and too poor to be viable. Then Israel will be forced to choose between remaining a democracy — giving equal rights to millions of Palestinians living in the West Bank and Gaza — and retaining its Jewish majority. That’s an existential decision that no Israeli government wants to make.