The United States had pressed the US-educated economist widely respected in the West to stay on, with Secretary of State John Kerry telephoning Abbas on Friday to urge him to find common ground with his prime minister.
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"We recognize the important roles played by both president Abbas and prime minister Fayyad, and appreciate both of their efforts as we and others work to support establishment of a viable, independent Palestinian state," said National Security Council spokeswoman Caitlin Hayden.
Fayyad and Abbas in Ramallah (Photo: EPA)
"Prime Minister Fayyad has been a strong partner to the international community and a leader in promoting economic growth, state-building and security for the Palestinian people. We look to all Palestinian leaders to support these efforts."
Abbas tasked Fayyad, 61, with the role of caretaker for the current government until a new prime minister is appointed, a Palestinian official said.
The two men have been at loggerheads amid mounting criticism of Fayyad's economic policies by Abbas' ruling Fatah movement, but Washington has lobbied hard for the 61-year-old, US-educated economist to stay on.
In Canada, Foreign Minister John Baird said he was "saddened and deeply disappointed" about Fayyad's decision to leave his post.
Hailing Fayyad as a "trusted and dedicated interlocutor and friend of Canada," Baird expressed hope that he will "continue to advance the cause of peace and continue to work to improve the lives of the Palestinian people."
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