RAMALLAH, West Bank (AP) – The Palestinian prime minister resigned Saturday in a sweeping leadership shakeup that also saw two senior officials replaced in Yasser Arafat’s overhaul of his security forces – a key U.S. and Israeli demand for restarting the deadlocked peace process.

The changes followed a series of kidnappings in the Gaza Strip that signaled a breakdown of authority.

“There is a crisis. There is a state of chaos in the security situation,” Ahmed Qureia said after announcing his resignation as premier during a Cabinet meeting in the West Bank town of Ramallah.

Queria told Palestinian officials he had resigned “because of a series of internal and external issues that developed in the recent period,” according to a statement from his office. He specifically cited the deteriorating security situation in Gaza.

Qureia sent his resignation letter to Arafat through an aide before the Cabinet meeting. The 74-year-old Palestinian leader, however, refused to accept it and scrawled a giant “X” over the paper with a pen, a Palestinian official said.

Nevertheless, Qureia said he would not withdraw the resignation, according to Minister of Local Government Jamal Shobaki.

The Cabinet planned to reconvene Monday to continue deliberations. It was unclear what would happen if the stalemate continued.

Qureia, who had held the job for 10 months, was unable to carry out deep reforms and root out corruption, with Arafat still holding the presidency and dominant power in the Palestinian territories.

He also had been frustrated by lack of progress on restarting the peace process with Israel, say officials close to him. No Israeli-Palestinian summit was held during Qureia’s time as prime minister.

Officials said the Cabinet meeting grew stormy at times. The interior minister, who is in charge of police and apparently was not consulted about the changes in the security infrastructure, walked out midway.

Israel had no comment on the swiftly unfolding events in the Palestinian territories. But Israel Army Radio quoted officials as saying the instability demonstrated again that Israel had no viable negotiating partner and must move forward with Prime Minister Ariel Sharon’s plan to unilaterally withdraw the army and settlers from Gaza next year.

The chaotic events also were likely to encourage opponents of Sharon’s plan who claim Israel cannot leave a security vacuum in Gaza and must stay.

Although failing to agree on the prime minister’s future, Arafat and Qureia met earlier Saturday and approved a series of steps to bring more than a dozen disparate security services under a more unified command.

They consolidated the services into three branches but all will remain under Arafat’s control. The specifics of the restructuring were not announced.

A reorganization of the splintered and often feuding security agencies was a primary demand of the United States as part of its moribund peace plan, known as the “road map.”

Militant organizations expressed disappointment. The Al Aqsa Martyrs’ Brigades said the changes would fail to stem corruption that riddles the security forces and threatened to take the law into its own hands.

The political crisis was precipitated by the kidnapping of two top security officials and four French charity workers in the Gaza Strip by militant organizations on Friday.

All were released unharmed after a few hours, but the abductions reflected the anger on the streets at the perceived ineffectiveness of the Palestinian Authority.

While the United States and Israel have tried to sideline Arafat, whom they see as the spoiler of Mideast peace efforts, Qureia’s government has been paralyzed without Arafat’s support for its decisions.

Qureia, also known as Abu Ala, was appointed in September 2003, when the first prime minister of the Palestinian government, Mahmoud Abbas, quit after just four months. The two men were among the main negotiators of the 1993 Oslo peace agreement with Israel that created the Palestinian Authority. Qureia’s resignation was the third in two days among well known figures in the Palestinian hierarchy. The head of the Palestinian Intelligence Service, Maj. Gen. Amin al Hindi, and the head of Preventive Security in the Gaza Strip, Rashid Abu Shbak, also quit Friday. Their resignations also were not immediately accepted by Arafat.

In addition to structural changes in the security forces, Arafat issued a presidential decree replacing his national security chief and his national police chief.

Arafat appointed his cousin, Mousa Arafat, as chief of public security, replacing Abdel Razzak Al-Majaideh, who was given the title of security adviser.

Mousa Arafat was among the earliest members of the Fatah movement that launched the Palestinian national struggle in 1965.

The Palestinian leader also appointed Saeb al-Ajez as the new police chief for the West Bank and Gaza. He replaced Ghazi Jabali, one of the security officials who was kidnapped on Friday. Jabali has been widely accused of corruption.

Hundreds of protesters, many of them armed, marched to the Palestinian Legislative Council building in Gaza City, waving banners and chanting slogans decrying the new appointments.

Samir Mashrawi, a member of Arafat’s Fatah faction, criticized corruption but expressed loyalty to the Palestinian leader.

“It’s not acceptable to fight corruption with more corruption. It’s forbidden to change one corrupt man for another,” he said.

In violence Saturday, a 21-year-old Palestinian man was killed when Israeli soldiers opened fire on Palestinians throwing rocks at them in the West Bank city of Nablus, Palestinian witnesses said. The Israeli military said soldiers shot a man who fired at them.

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Associated Press reporter Lara Sukhtian in Jerusalem contributed to this report.

AP-ES-07-17-04 1629EDT