The UN Secretary-General has warned that the Palestinian Authority could collapse because of the stalemate in the Middle East peace process.
Kofi Annan (left) said he was afraid there would be "real despair"
Kofi Annan was speaking after talks in Brussels with the leadership of the European Union.
He appealed for more aid, saying that deteriorating conditions were making the situation bleak for Palestinians.
His comments came after least eight Palestinians were killed during an Israeli army raid on the Gaza Strip.
Negotiations between Israel and the Palestinians have stalled, blocking progress on the US-backed "roadmap".
"I am afraid that if the situation continues, we will see real despair and perhaps even partial collapse of the Palestinian Authority," Mr Annan said after talks with the Irish Foreign Minister Brian Cowen, whose country holds the presidency of the EU.
The EU, together with Russia, the United States and the United Nations, is part of the international quartet that drafted the proposed steps towards peace known as the roadmap.
The BBC's James Reynolds in Jerusalem says the roadmap plan only survives at present in the minds of the most optimistic peacemakers.
Mr Cowan said he agreed there was a need to "re-energize" the peace process.
"We are both .. extremely concerned about the situation on the ground, the stalemate which appears to persist," he said.
Mr Annan said the quartet need to find a way to break the "impasse" and bring both sides to the negotiating table.
Israel says the Palestinian Authority must crack down on suicide bombings before it will resume peace talks.
The Palestinians want Israel to halt settlement-building in the occupied territories and to stop building its barrier in the West Bank.
Earlier on Wednesday, Palestinian militants opened fire as tanks went into Gaza City's al-Zeitoun area, witnesses said.
The fighting came hours before Palestinian Prime Minister Ahmed Qurei had talks with United States Middle East envoy, John Wolf.
The latest Israeli incursion followed an alert about a possible attack on the nearby Netzarim settlement, the Israeli military said.
A spokesman said soldiers were met by Palestinian anti-tank missiles, mortar fire and other explosive devices.