The government expects an increase in terrorist activity this year, mainly because of the growing power of terrorist organization (like Hamas) in the Palestinian territories and the competition between these groups to appear more effective in attacking Israel. The terrorist groups, now mainly supported by Iran, Arab charity organizations and European Union humanitarian aid, have a chance of taking control of the Palestinian territories. To do so, they must appear more effective in achieving their goal of destroying Israel and driving non-Moslems out of the region. Israeli anti-terrorist operations, however, have been increasingly effective. Last year, Israeli police killed 53 terrorists and arrested 275. In addition, another 1,700 suspects were arrested. Israel has increased its attacks against key members of terrorist organizations. The Palestinian terrorist groups are suffering a shortage of skilled manpower as a result, which can be seen in the lower number of successful terrorist attacks, and the increasing number of attacks that are aborted, often with the capture of some of the team (either the suicide bomber, or support members of the team.)

The Palestinian Authority is becoming a bystander in all this. Having unleashed the terror campaign three years ago because of an inability to sell a peace deal to the Palestinian hard liners, the Palestinian Authority infrastructure has been largely destroyed in the process. While the Palestinian Authority still controls a lot of the aid money coming in from the European Union and Arab charities, more evidence is appearing that lots of that money is being lost to corruption and the support of terrorist activities. The Palestinians are blaming the Israelis, which always works in the Arab media and often works in Europe as well. While embezzlement charges have led to some investigations in Europe, the Palestinians are still portrayed as the innocent victims and the Israelis as the jack booted occupiers. The Palestinian terrorist attacks are often explained by European media as legitimate self defense against Israeli measures to defend themselves against terrorist attacks. The long time Palestinian propaganda campaign to destroy Israel is played down, or simply ignored. This Palestinian media edge in Europe is seen by the Palestinians as their most notable success so far, and they are trying to convert this into a European embargo against Israel good (Europe is a major trading partner of Israel) and UN sanctions as well.

The Israeli proposal to withdraw from Gaza in return for a Palestinian crackdown on terrorist activity is stalled. The Palestinians are split on their ability to stop all terrorist attacks. Some terrorist groups feel that a year or so of "truce" with Israel, in return for complete control of Gaza and the withdrawal of Israeli settlers and troops, would enable the terrorists to rebuild their organizations and be ready to make even more damaging attacks on Israel. Many Israelis and Palestinians believe that a withdrawal from Gaza would be seen as an Israeli defeat and would just encourage the terrorists.