The prime minister of the Hamas government in Gaza has denied Israeli allegations that al-Qaida operates in the coastal strip and that Palestinian militants had planned to carry out attacks in neighboring Egypt.
Ismail Haniyeh told reporters Wednesday that such allegations are lies meant to prepare the ground for future Israeli attacks on Gaza.
He says he sent a reassuring letter to Egypt's intelligence chief.
Israel's military believes that al-Qaida operatives have infiltrated Gaza.
Israeli air strikes killed three Gaza militants last month who Israel said planned attacks in Egypt's Sinai peninsula.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
BANI HASSAN, West Bank (AP) -- Palestinians will be ready for statehood by August, as promised in a two-year action plan, Palestinian Prime Minister Salam Fayyad said in an interview Tuesday, dismissing a host of steep obstacles to independence.
The former World Bank economist visited rural West Bank road destroyed by Israel to demonstrate his belief that independence is inevitable as long as Palestinians don't lose faith.
The road was torn up by Israeli troops last week, on grounds that it was paved in a nature reserve in an area under full Israeli rule. Fayyad pledged to repair it immediately as part of his new campaign to challenge exclusive Israeli control over large tracts of the West Bank.
"This is where the struggle is, in the rural areas," Fayyad said during the ride back to his Ramallah office.
Despite Fayyad's optimism, signs abound that independence is still a long way off: his motorcade was led by an Israeli police cruiser, and Israeli settlements and unauthorized hilltop outposts on either side of a main West Bank highway.
Fayyad acknowledged the limitations to his authority.
The Israeli police escort is "basically a way of saying, we are in control here," Fayyad said. Israel cites concerns for his safety as the reason for insisting on sending a patrol car whenever he leaves his office in the West Bank town of Ramallah, he said.
Fayyad's Palestinian Authority operates with limited autonomy in 40 percent of the West Bank, where most of the territory's 2.3 million Palestinians live. Another 60 percent, home to more than 120 Israeli settlements, remains under full Israeli control.
In August 2009, Fayyad presented a two-year plan for building state institutions, including schools, courts and infrastructure. The idea was to generate momentum for independence regardless of crisis-prone Israeli-Palestinian peace talks.
With his plan in its final phase, Fayyad said it's time to challenge Israel's exclusive control over vast tracts of the West Bank. Rebuilding the little road is just a symbol.
Fayyad said his next big project is a $400 million international airport near the West Bank town of Jericho. He acknowledged that he does not have funding yet, but said he wants to put facts on the ground.
Israeli government spokesman Mark Regev recommended cooperation.
"This must be done in coordination," he said, "and I think if we look at the progress of the last few years, though many challenges remain, we can see there have been many positive developments."
While Israel has significantly eased restrictions on Palestinian trade and movement, spurring modest economic growth in the past two years, it rarely grants construction permits in the areas under its control.
Major development projects, including industrial parks and the Palestinians' first planned city, have been held up because Israel would not give the go-ahead for sections under their control.
Even so, Fayyad said his government has made good progress on the two-year plan. "It could happen tomorrow, it could happen next month, but certainly no later than August of next year," he said.
Fayyad said his government is becoming less dependent on foreign aid, reducing outside support for the operating budget from $1.8 billion in 2008 to $1.2 billion this year, out of a total of $3.8 billion. By 2013, he won't need any foreign help with the budget, he predicted.
A gaping hole in many statehood plans is what to do with Gaza, which is to be the third component of a Palestinian state, along with the West Bank and east Jerusalem, but has been controlled by the Islamic militant Hamas since a violent takeover in 2007. The deep political split between Hamas and the more pragmatic West Bank government is no closer to being healed after repeated reconciliation efforts.
Fayyad said the split and Hamas' insistence on trappings of power in Gaza were misguided.
"Do I really feel a sense of sovereignty? No. Nor should anyone," he said. "So long as there is (Israeli) occupation, the state of occupation still exists in the West Bank and Gaza, what is all the fuss about? Let's gain real sovereignty and then we'll talk about it."