Bethlehem - Ma'an/Agencies - Prime Minister Salam Fayyad's plan for building a state in two years contains a "classified, unreleased portion" stipulating a unilateral state declaration, Israeli officials said on Saturday.

The proposal, released to the public in August, includes an assessment of institutional needs for the creation of a state, and sets a timetable of up to two years for its implementation.

But according to Israeli officials quoted on Saturday by the country's mainstay daily newspaper, Haaretz, "alongside the clauses reported in the media... Fayyad's plan also contains a classified, unreleased portion stipulating a unilateral declaration of independence."

Senior Israeli officials said the proposal initially met with positive reaction for its emphasis on institution-building and making security services more efficient, the newspaper noted, but reported that the specter of a unilateral declaration, which would be devastating for Israel's international legitimacy as an occupying power, was sending shock-waves through the current administration.

Reporting on the implications of President Mahmoud Abbas' decision to leave office and reports that he sought to dismantle the Palestinian Authority, Haaretz reported that Fayyad had reached a secret understanding with the Obama administration over US recognition of an independent Palestinian state.

Palestinian Authority spokesman Ghassan Khatib said he was not aware of any classified section of Fayyad's plan. Asked about the alleged secret agreement between Fayyad and Obama, he noted, "Haaretz is not reporting news of such an agreement, rather they are reporting worries and concerns."

"If they are worried and concerned, let them be. They [the Israelis] have plenty of reasons to be worried and concerned," he added, in a phone interview on Sunday afternoon.

According to the newspaper, Fayyad's plan specifies that at the end of a designated period for bolstering national institutions, the PA, along with the Arab League, would file a "claim of sovereignty" to the UN Security Council and General Assembly on the borders of 4 June 1967, before Israel's occupation began.