By Noah Browning and Ali Sawafta
RAMALLAH, West Bank (Reuters) - Palestinian officials and the United States voiced optimism on Sunday that the resignation of U.S.-backed Prime Minister Salam Fayyad would not hinder Washington's planned development initiative for the West Bank.
Fayyad quit on Saturday after months of tension with President Mahmoud Abbas, leaving the Palestinian Authority, which exercises limited self-rule in the Israeli-occupied West Bank, in confusion just as the United States tries to revive peace talks with the Jewish state.
His exit came less than a week after U.S. Secretary of State John Kerry visited and promised a plan to remove "bottlenecks and barriers" to economic development in the West Bank.
Kerry told reporters in Tokyo on Sunday the United States would pursue its initiative "no matter what" and there is "more than one person that (the United States) can do business with".
"We will continue to work at this and hope that President Abbas finds the right person to work with him in a transition and to work with us and to establish confidence," Kerry said.
U.S.-educated Fayyad, a former World Bank official, was appointed in 2007 and drew Western praise for his efforts to develop institutions fit for a future Palestinian state. But his popularity sank amid 25 percent unemployment and soaring prices.
Palestinian officials said Fayyad, trusted by the West as a non-corrupt conduit for aid funds, would not handle the U.S. development plan as interim caretaker prime minister.
But, one official said, "everyone knows that aid is meant for the Palestinian people, and not just one man", and implementation of the initiative would be monitored by President Mahmoud Abbas and "a team of his choosing".
Hanan Ashrawi, a senior Palestine Liberation Organisation official, said Fayyad's resignation was internal politics and should have no bearing on Western efforts to boost the economy.
"It would be counterproductive and flagrant meddling to punish us for what was a domestic political decision, and something that was long in the making," Ashrawi said.
Abbas and his Fatah party wrangled with Fayyad, an independent, over his handling of the moribund economy. The public debt and deficit have deepened and the World Bank predicts that 11 percent growth in 2010-11 will halve in 2013.
A poll in April put Fayyad's approval rating at 25 percent, versus 49 percent for Abbas and 40 percent for Ismail Haniyeh, the Islamist Hamas party's prime minister in the Gaza Strip.
Despite Fayyad's reputation for clean dealing in the West, 78 percent of West Bank residents perceived Palestinian Authority institutions to be corrupt, according to the same survey by the Palestinian Center for Policy and Survey Research.
"Thank God he's finally gone," said Khaled Ashraf, a restaurateur in Ramallah. "Sure there was some growth, but it's all done now, and just like usual the people aren't better off."
Some Palestinian officials credited Fayyad with progress, but said he had a tough job reviving an economy under Israeli occupation and as aid flows dwindled.
The Hamas government in Gaza, which split from Fatah in a 2007 war, despised Fayyad, seeing him as complicit in Israel's blockade on the coastal enclave and a usurper of Hamas's claim to the premiership after it swept parliamentary polls in 2006.
"It's good that he's left. This gives (Fatah-Hamas) reconciliation a way forward," said Mohammed Dar Ahmed, 23, one of 4,800 Palestinians in Israeli jails. Dar Ahmed spoke during an Israeli-sponsored media tour of Ofer prison in the West Bank.
"What about settlements? What about the prisoners? We need a prime minister who will solve the issues of Palestine," he told Reuters. It was not immediately clear why he was in prison.
Palestinian law requires the president to choose Fayyad's replacement within two weeks, but Abbas has outstayed his own term by four years and parliament has not met for years.
He may yet wait for an elusive Hamas-Fatah pact before he appoints a unity cabinet, which could take months.
(Additional reporting by Arshad Mohammed in Tokyo; Editing by Jason Webb)