Palestinian Authority Broke and In Disarray: Collapse Is 'Real Possibility' By John Ward Anderson and Molly Moore

Three years and five months after Palestinians began their second uprising against Israel, the Palestinian Authority is broke, politically fractured, riddled with corruption, unable to provide security for its own people and seemingly unwilling to crack down on terrorist attacks against Israel, according to Palestinian, Israeli and international officials.

The turmoil within the Palestinian Authority is fueling concern that the agency -- created almost 10 years ago to govern the West Bank and Gaza Strip -- is disintegrating and could collapse, leaving a political and security vacuum in one of the Middle East's most volatile regions, many of those officials said...

Because of budget shortfalls in recent months, the authority has taken out loans from Arab-owned commercial banks to pay salaries while also imposing pay cuts on its 140,000 employees. Frustrated by allegations of corruption and the slow pace of economic reform, foreign donors are reducing funding to the authority or diverting money to nongovernmental organizations.

It sounds to me like the main problems are failure to develop economic opportunities and corruption, but some quotes Arafat saying, "Let it collapse. It will be the fault of Israel and the Americans." And yet,

French prosecutors recently revealed that they were investigating whether Arafat's wife, Suha Arafat, who resides in Paris, improperly received more than $10 million in authority funds. The International Monetary Fund said in a report issued last fall that more than $900 million in public funds were "diverted" to Israeli private bank accounts controlled by Arafat and his financial adviser or to other uses for which the IMF said it could find no full accounting.