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Throughout the Arab world there are challenges to the status quo, but not when it comes to the Palestinians. The peace process with Israel remains a stalemate and Palestinian leader Mahmoud Abbas is preparing an initiative at the U.N. to jumpstart the push for statehood.

NPR's Jackie Northam has our story.

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JACKIE NORTHAM: A cappuccino maker whips up a thick froth of creamy milk for a customer at this upscale coffee shop in Ramallah, the political and commercial capital of the occupied West Bank. This is one of many new businesses that have sprung up here over the past couple of years.

A huge injection of international aid has also helped build up the security forces, health care systems and other institutions - so much so that the European Union, the World Bank and other international organizations have concluded that the Palestinians are ready to run their own affairs.

This is key for Palestinian leaders, who will use it when they go before the United Nations General Assembly in September and ask for a resolution recognizing statehood. Ghassan Khatib, a Palestinian government spokesman, says the time is ripe to pass the resolution.

Mr. GHASSAN KHATIB (Government Spokesman, Palestine): There are many indicators that the international community is seriously convinced that this is the time to realize the two-state solution.

NORTHAM: Khatib says developments in the Arab world have increased pressure on the Palestinian Authority to show some progress in the peace process. And that is what prompted the planned push at the U.N.

Mr. KHATIB: This leadership, which has been associated with the bilateral negotiations that has been completely failure, are required by the Palestinian public to do something or probably to step aside because the current situations are not sustainable.

NORTHAM: Khatib says there is a growing consensus that there needs to be a paradigm shift from a bilateral approach to a multinational one to try to get some forward motion on a peace agreement. The U.N. General Assembly admitted Israel into the world body in 1949. The idea that the Palestinians will seek similar recognition has unnerved many Israelis.

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Unidentified Man: (Speaking foreign language)

Unidentified Woman: (Speaking foreign language)

NORTHAM: Last week, a peace demonstration in Tel Aviv turned loud and ugly. A small group of Israelis, mostly actors and intellectuals, had unveiled the petition in favor of a Palestinian state on the basis of the 1967 borders. The group was shouted and sworn at by the protesters. There's a fear among many here that Israel will become further isolated if the Palestinians are recognized.

Mark Regev is a spokesman for Prime Minister Benjamin Netanyahu.

Mr. MARK REGEV (Spokesman, Israeli Prime Minister): We are concerned. We're concerned that the Palestinians have taken a strategic decision not to negotiate - it certainly appears that way - and to go around Israel and try to find an imposed solution. But it's not going to work.

NORTHAM: Regev says it's likely the Palestinians will get the resolution passed, but he doubts it will change anything on the ground.

Mr. REGEV: The question is, do they want more empty declarations, do they want more worthless pieces of paper, or do they really want Palestinian statehood?

NORTHAM: Regev says Prime Minister�Netanyahu will address the Palestinian issue in a speech to the U.S. Congress next month. President Obama is also expected to weigh in soon.

But now there is a new element that will likely affect the calculations in both Jerusalem and Washington. In Cairo yesterday, a deal was signed to create an interim unity government between Fatah, which dominates the Palestinian Authority, and its longtime rival, Hamas, the militant group that rules the Gaza Strip. Israel and the U.S. consider Hamas a terrorist organization. But Ahmed Yousef, a former Hamas official, says the reconciliation between the two main Palestinian factions will add weight to their bid for statehood.

Mr. AHMED YOUSEF (Hamas Spokesman): When we have, like, a new government -unity government being backed by both Fatah and Hamas, this will help in September, when the Palestinian will go to the General Assembly. This will help the Palestinian.

NORTHAM: But Prime Minister Netanyahu has already said there will be no hope for the peace process if there's a Palestinian government that includes Hamas.

Jackie Northam, NPR News, Jerusalem.

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