We are in crisis because we couldn't make peace and can't make war, we couldn't achieve our national rights by negotiations or by war, said Hatem Abdel Khader, a senior Fatah member.

The once dominant Fatah has been struggling since 2006, when it was trounced by Hamas in parliament elections. Since then, it has been unable to bounce back or shake its image of being corrupt, rudderless and divided.

Fatah's failure to promote younger activists to top positions also hurt the movement. Last year's party convention, the first in 16 years, was to have been a turning point, but produced no dramatic leadership changes.

Still, it looked sure to triumph in the July 17 elections in 300 towns and villages since Hamas announced it would not compete, fearing its candidates would be targeted in the crackdown Abbas' security forces have waged on the militants since they seized Gaza.

However, last week, with the deadline for registering candidates just hours away, Fatah leaders were getting increasingly worried about problems in many districts. In Nablus, the second largest city, former Mayor Ghassan Shakaa defied local Fatah leaders and formed his own slate, arguing that he would do better as an independent.

In the largest city, Hebron, little-known Fatah candidates seemed poised for defeat by independents.

With these reports in hand, the party leaders called Abbas, who was in Washington at the time, and urged him to cancel the election. Abbas quickly agreed and a terse statement said the vote was being postponed to give reconciliation with Hamas another chance.

Fatah has been burned twice before by heading into elections despite warnings of impending defeat. Hamas scored heavily in 2005 municipal elections and a year later won the parliamentary poll.