Mahmoud Abbas's announcement that he won't seek another term of office as president of the Palestinian Authority is no hollow threat. It is not only the culmination of close to six years of disappointment over the inability to establish a Palestinian state alongside Israel by agreement, but also an acknowledgment that any further delay in achieving this goal will render it irrelevant. The alarm bells should be ringing loudly and incessantly in Israel. The fact that they are not is a manifestation of the superficial smugness that has come to replace policy in the upper echelons of the Netanyahu coalition. The official Israeli response to the Palestinian leader's decision has been to shrug it off as an internal Palestinian matter. It is not. Such a move would substantially change the terms of the Palestinian-Israeli equation that have been in place since the beginning of the Oslo process. It is high time that Israeli decision-makers grasp what they have failed to in the past: that the Palestinians are players whose actions have a direct bearing on the country's strategic options. This requires making a serious effort to transcend the essentialist mind frame that has enabled this government to be lulled into inaction by its own words, to look rationally at the implications of a possible Abbas resignation at this time, and to take much-needed measures to avert such an eventuality. INITIAL ISRAELI commentaries on the possible resignation have focused, too obviously, on the identity of his replacement. Numerous names have been raised - from Jibril Rajoub and Muhammad Dahlan to the veteran Abu Maher Ghnaim and the seasoned diplomat Nasser al-Kidweh. The most prominent person in this pool is Marwan Barghouti, the incarcerated Fatah leader whose influence extends far beyond the confines of his jail. Preoccupation with the succession stakes, however, obscures the two alternative scenarios that might follow upon any leadership change at this juncture. The first - widely debated in Palestinian circles today - is that Abbas's departure from the political scene will be accompanied by the dismantlement of the PA, established in 1994 as an integral part of the Gaza-Jericho agreement. The PA has held responsibility for the administration of Palestinian affairs in Area A and, to a lesser extent, in Area B in the West Bank for the past 14 years and in Gaza until the Hamas takeover in 2006. It has been viewed by Israel as its counterpart in all civilian matters and as the repository of accountability for Palestinian actions in general. The establishment of this framework for self-rule was conceived of as the institutional facet of Palestinian state building. From the outset, however, the PA's powers were severely curtailed. Its corruption-prone infrastructure was virtually destroyed by Israel during the second intifada. In the past few years, major international efforts - spearheaded by the World Bank and the Quartet and heavily bankrolled by the European Union - have been made to restore bureaucratic effectiveness and to enhance the ability to maintain law and order. But, despite Abbas's continued commitment to a negotiated agreement, these steps have not yielded any real progress toward the realization of independent statehood nor, in the eyes of many, to the tangible improvement of the situation on the ground. Now the idea of disbanding these structures of responsibility without authority is gathering steam. Such a strategy - a sign of the loss of faith in the possibility of a durable settlement with Israel - reflects the widespread unwillingness of the PA to continue to act as a surrogate for Israeli overrule. It also makes preparations for elections in January 2010 or for the selection of a successor to Abbas superfluous. Thus, the present PLO leadership would be relieved of the onus of perpetuating an administration leading nowhere. In effect, this would constitute a final Palestinian divorce not only from the Oslo process, but from its far more persistent operating structures as well. The purposeful breakdown of the PA would ostensibly place the burden of direct rule on Israel's shoulders. No Israeli government, however, wants to or truly can deal with the intricacies of daily Palestinian life. At the same time, the prospect of anarchy (and with it the probability of Hamas control over the West Bank as well as Gaza) is even more distasteful. In these circumstances an international trusteeship is less far-fetched than one can imagine. What is holding back such a declaration is that the cost for the Palestinian population - in terms of salaries (the PA is the main employer in the occupied territories), services and basic civil order - may be immeasurable and that it would put an end to the dream of Palestinian sovereignty in the foreseeable future. A second alternative which does not entail cutting off one's nose to spite one's face does exist: the implementation of the Fayad state-building plan, which may bring about the announcement of a sovereign state with international legitimacy in the next two years. This strategy of "ending the occupation despite the occupation" maintains some hope for the sustainability of Palestinian sovereignty over time. When taken together with Javier Solana's somewhat different notion of imposing a detailed two-state solution on the parties via a Security Council resolution, this program is garnering rising support in the global arena. The problem with this scenario is that, despite the respect the Palestinian prime minister commands, he lacks political traction domestically. Without such backing at home, it is doubtful that he can carry the day during a tricky period of leadership transition. If he succeeds, Israel would still have to face the reality of a Palestinian state without the benefit of the resolution of the conflict. THERE IS another option (one which requires an immediate and conscious Israeli decision): the resumption of final-status negotiations forthwith. Serious talks at this stage necessitate a full settlement freeze. Anything less, which is precisely what Israel is suggesting at the moment, will neither dissuade Abbas from his declared course nor prevent its deleterious repercussions. The parameters for the resolution of the Israeli-Palestinian conflict are shifting dramatically, the equanimity of the Netanyahu government notwithstanding. The pattern of growing impatience with the status quo has highlighted the bankruptcy of Israeli policy. Israel's vulnerability is visible to anyone who cares to look: growing international isolation punctuated by the Goldstone Report, the specter of economic as well as academic sanctions, the decline in the stature of the US as an honest broker and the impending emergence of Europe as a global power. Israel can no longer ignore hard choices. The bubble of self-satisfaction and defensiveness that it has constructed to justify its foot-dragging in creating a viable Palestinian state is about to burst, leaving it to deal with the consequences of its own paralysis. Rationality, morality and self-interest combine to demand that the government exhibit the required leadership to secure Israel's future by taking the steps necessary to reach the negotiating table now. Anything less will either bring about a Palestinian state at the expense of Israel's future standing or lay the groundwork for a single state that will undermine its existence entirely.