Palestine peace deal could be sunk by continued cash crisis

He said the PA needed the money to be ready for statehood and pointed out that donors have come up $300 million (£185m) short. The US owes $200m (£125m) of that.

He also urged the international community to take action to create "the political horizon" to end the decades-old Israeli-Palestinian conflict.

Talks have been frozen for more than three years and there are no signs they will resume.

"The two state solution is in jeopardy if the PA is not able to continue to function and prepare for the two-state solution," he said.

He spoke following a meeting of 27 donor nations, global financial institutions and representatives of the UN, US, European Union and Russia - the so-called Quartet of Middle East peace mediators.

Norway's Foreign Minister Espen Barth Eide, who heads the Ad Hoc Liaison Committee donor support group, said the PA's cash crisis "is dire and is getting worse."

He said that donors reconfirmed their previous assessment that the Palestinian Authority's institutions are ready for statehood.

However, he warned that the economy was slowing after three years of progress.

"During 2012, the Palestinian Authority is experiencing a severe fiscal crisis, due to shortfalls in domestic revenues, tax income, and donor contributions," he said.

"It may face a financing gap of at least $400m (£245m) at the end of the year."

The committee called on donors to stump up the previously promised cash and more.

Mr Eide said that a US official had told him Washington intended to pay up.