It’s a possibility that has been raised in the past, but with the current round of peace talks apparently now well and truly dead, the Palestinian Liberation Organization (PLO) is giving serious talks to dismantling the Palestinian Authority (PA) entirely.
Under the Oslo Accords, the PA has some measure of autonomy in governance of West Bank Palestinian cities under Israeli occupation. The PA is pretty much perpetually on the verge of bankruptcy, relying on foreign aid and Israeli collected tax money, which Israel is often withholding for some perceived slight or other.
The PA was never really intended to be a long-term solution anyhow, and was meant to just give the Palestinians some autonomy until a final peace deal was reached that granted them full independence. Instead, it has become a caretaker for cities under seemingly permanent occupation.
Dismantling the PA would mean either conning the UN into taking over the territory directly, an unlikely proposition, or simply handing the keys back to Israel and forcing the Israeli military, the official governor of the occupied territories, to handle basic services in major cities.
That’s a lose-lose for the Israelis, who would be stuck with a major bill in providing those services to the cities, and would also face more direct blame when their policies cause hardship in cities that have come under their direct rule.