Palestine Prime Minister Ahmed Qurie in Ramallah, West Bank. (AFP)

Ramallah, July 20 (Reuters): The Palestinian cabinet failed today to resolve a leadership crisis as Prime Minister Ahmed Qurie agreed to stay on for now but kept a threat to quit “because he has no powers”, officials said.

Qurie is frustrated over President Yasser Arafat’s refusal to allow him to reform Palestinian institutions widely seen as corrupt and out of touch. International mediators regard reforms as crucial to reviving Palestinian-Israeli peace talks.

A senior Palestinian official said Qurie, who decided on Saturday to quit over unprecedented pro-reform unrest, told a crisis cabinet meeting today he would remain in his post for now but would not formally withdraw his tendered resignation.

Palestinian negotiations Minister Saeb Erekat said Qurie was still deadlocked with Arafat over the President’s unwillingness to cede him powers to launch meaningful reforms, particularly to a murky jumble of security services ridden by cronyism.

“President Arafat insists on rejecting the resignation,” Erekat said after a crisis cabinet meeting. “Abu Ala (Qurie) insists on resigning. The crisis goes on.”

Another senior official said Qurie wanted out essentially because he had no powers to effect change, or even to resign.

“How can he continue to run a government without powers? He feels he has failed to carry out any of is duties because he has no powers,” said the official, who requested anonymity. “Our crisis is the state of chaos and it hasn’t been resolved today.”

Qurie, in office since November, quickly departed after the cabinet adjourned, refusing to take questions from reporters.

Participants in the cabinet meeting said the main issue was Qurie’s demand that Arafat “empower” the interior minister to overhaul overlapping security services that answer to the President. Arafat has balked at this in the past.