Fayyad is an internationally respected economist and politician. Salam Fayyad received his MBA from St. Edwards University in 1980. Dr. Fayyad has a Ph.D. in economics from the University of Texas at Austin, where he was a student of William A. Barnett and where he did early research on the American Divisia Monetary Aggregates, which he continued on the staff of the Federal Reserve Bank of St. Louis. Fayyad began his career teaching economics at Yarmouk University in Jordan, before joining the World Bank from 1987 - 1995. He subsequently became the International Monetary Fund representative to the Palestinian National Authority until 2001, before becoming its Finance Minister.
Upon resigning as Finance Minister, Fayyad ran as founder and leader of the new Third Way political party in the Palestinian legislative election of 2006 alongside Hanan Ashrawi and Yasser Abd Rabbo. Fayyad and Ashrawi won seats in the PLC.
He is seen as pro-Western and was predicted to be offered the post of Prime Minister of the PNA by both Fatah, and as of January 26, 2006, also by the winner of the elections: the List of Change and Reform (Hamas). In response to the offer, Fayyad presented several conditions to becoming Prime Minister, including that Hamas would recognize Israel, which Hamas declined.
On March 18, 2007, Fayyad was appointed Finance Minister of the Fatah-Hamas unity government. On June 15, 2007, following the Hamas takeover of the Gaza Strip, Fayyad was appointed Prime Minister of a new "independent" government (without any Fatah or Hamas members) which is effectively supported by the Fatah and Israel.
This appointment has been challenged as illegal, because while the Palestinian Basic Law permits the President of the PNA to dismiss a sitting prime minister, the appointment of a replacement requires the approval of the PLC. The law provides that after removal of the Prime Minister (in this case, Ismail Haniyeh), the outgoing prime minister heads a caretaker government. The current PLC, in which Hamas holds a majority of seats, has not approved the appointments of Fayyad or the balance of his new government. Fayyad's appointment was never placed before, or approved by the PLC.. Haniyeh has continued to operate as Prime Minister in Gaza, and is recognized by a large number of Palestinians as the legitimate caretaker Prime Minister of the PNA. Anis al-Qasem, the Palestinian constitutional lawyer who drafted the Basic Law, is among those who publicly declared the appointment of Fayyad to be illegal..