Thomas Friedman writes about the Palestinian economy in today's op-ed in the New York Times. I think the most significant paragraph is this one:
The most important thing President Obama can do when he meets Israel’s prime minister, Bibi Netanyahu, on July 6 is to nudge him to begin gradually ceding control of major West Bank Palestinian cities to the Palestinian Authority so that Fayyad can show his people, as he puts it, that what he is building is an independent state “not an exercise in adapting to the permanence of occupation” — and so that Israel can test if the new Palestinian security forces really can keep the peace without Israel making nighttime raids. Nothing would strengthen Fayyadism more than that.
Would Netanyahu do such a thing as an interim step? I don't think so, but one hopes Obama might convince him.