Abir Dandis, the mother of the two girls who were murdered in the Negev town of Al-Fura’a last week, couldn't find a police officer to listen to her warnings, neither in Arad nor in Ma’ale Adumim. Both police stations operate in areas where Israel wants to gather the Bedouin into permanent communities, against their will, in order to clear more land for Jewish communities. The dismissive treatment Dandis received shows how the Bedouin are considered simply to be lawbreakers by their very nature. But as a resident of the West Bank asking for help for her daughters, whose father was Israeli, Dandis faced the legal-bureaucratic maze created by the Oslo Accords.

The Palestinian police is not allowed to arrest Israeli civilians. It must hand suspects over to the Israel Police. The Palestinian police complain that in cases of Israelis suspected of committing crimes against Palestinian residents, the Israel Police tend not to investigate or prosecute them.

In addition, the town of Al-Azaria, where Dandis lives, is in Area B, under Palestinian civilian authority and Israeli security authority. According to the testimony of Palestinian residents, neither the IDF nor the Israel Police has any interest in internal Palestinian crime even though they have both the authority and the obligation to act in Area B.

The Palestinian police are limited in what it can do in Area B. Bringing in reinforcements or carrying weapons in emergency situations requires coordination with, and obtaining permission from, the IDF. If Dandis fears that the man who murdered her daughters is going to attack her as well, she has plenty of reason to fear that she will not receive appropriate, immediate police protection from either the Israelis or the Palestinians.

Dandis told Jack Khoury of Haaretz that the Ma’ale Adumim police referred her to the Palestinian Civil Affairs Coordination and Liaison Committee. Theoretically, this committee (which is subordinate to the Civil Affairs Ministry) is the logical place to go for such matters. Its parallel agency in Israel is the Civilian Liaison Committee (which is part of the Coordination and Liaison Administration - a part of the Civil Administration under the Coordinator of Government Activities in the Territories).

In their meetings, they are supposed to discuss matters such as settlers’ complaints about the high volume of the loudspeakers at mosques or Palestinians’ complaints about attacks by settlers. But the Palestinians see the Liaison Committee as a place to submit requests for permission to travel to Israel, and get the impression that its clerks do not have much power when faced with their Israeli counterparts. In any case, the coordination process is cumbersome and long.

The Palestinian police has a family welfare unit, and activists in Palestinian women’s organizations say that in recent years, its performance has improved. But, as stated, it has no authority over Israeli civilians and residents. Several non-governmental women’s groups also operate in the West Bank and in East Jerusalem, and women in similar situations approach them for help. The manager of one such organization told Haaretz that Dandis also fell victim to this confusing duplication of procedures and laws. Had Dandis approached her, she said, she would have referred her to Adalah, the Legal Center for Arab Minority Rights in Israel, which has expertise in navigating Israel’s laws and authorities.

John Kerry revealed his long-awaited plan for peace in the Middle East on Sunday, hinging on a $4bn (£2.6bn) investment in the Palestinian private sector.

The US secretary of state, speaking at the World Economic Forum on the Jordanian shores of the Dead Sea, told an audience including Israeli president Shimon Peres and Palestinian leader Mahmoud Abbas that an independent Palestinian economy is essential to achieving a sustainable peace.

Speaking under the conference banner "Breaking the Impasse", Kerry announced a plan that he promised would be "bigger, bolder and more ambitious" than anything since the Oslo accords, more than 20 years ago.

Tony Blair is to lead a group of private sector leaders in devising a plan to release the Palestinian economy from its dependence on international donors. The initial findings of Blair's taskforce, Kerry boasted, were "stunning", predicting a 50% increase in Palestinian GDP over three years, a cut of two-thirds in unemployment rates and almost double the Palestinian median wage. Currently, 40% of the Palestinian economy is supplied by donor aid.

Kerry assured Abbas that the economic plan was not a substitute for a political solution, which remains the US's "top priority".

Peres, who had taken the stage just minutes before, also issued a personal plea to his Palestinian counterpart to return to the negotiations.

"Let me say to my dear friend President Abbas," Peres said, "Should we really dance around the table? Lets sit together. You'll be surprised how much can be achieved in open, direct and organised meetings."

Thick locks hug the front gates of shuttered shops, now covered in graffiti and dust from lack of use. Only a handful of customers pass along the dimly lit road, sometimes stopping to check the ripeness of fruits and vegetables, or ordering meat in near-empty butcher shops.

“All the shops are closed. I’m the only one open. This used to be the best place,” said 64-year-old Mustafa Sunocret, selling vegetables out of a small storefront in the marketplace near his family’s home in the Muslim quarter of Jerusalem’s Old City.

Amidst the brightly coloured scarves, clothes and carpets, ceramic pottery and religious souvenirs filling the shops of Jerusalem’s historic Old City, Palestinian merchants are struggling to keep their businesses alive.

Faced with worsening health problems, Sunocret told IPS that he cannot work outside of the Old City, even as the cost of maintaining his shop, with high electricity, water and municipal tax bills to pay, weighs on him.

“I only have this shop,” he said. “There is no other work. I’m tired.”

Abed Ajloni, the owner of an antiques shop in the Old City, owes the Jerusalem municipality 250,000 Israeli shekels (68,300 U.S. dollars) in taxes. He told IPS that almost every day, the city’s tax collectors come into the Old City, accompanied by Israeli police and soldiers, to pressure people there to pay.

“It feels like they’re coming again to occupy the city, with the soldiers and police,” Ajloni, who has owned the same shop for 35 years, told IPS. “But where can I go? What can I do? All my life I was in this place.”

He added, “Does Jerusalem belong to us, or to someone else? Who’s responsible for Jerusalem? Who?”

Illegal annexation

Israel occupied East Jerusalem, including the Old City, in 1967. In July 1980, it passed a law stating that “Jerusalem, complete and united, is the capital of Israel”. But Israel’s annexation of East Jerusalem and subsequent application of Israeli laws over the entire city remain unrecognised by the international community.

Under international law, East Jerusalem is considered occupied territory – along with the West Bank, Gaza Strip and Syrian Golan Heights – and Palestinian residents of the city are protected under the Fourth Geneva Convention.

Jerusalem has historically been the economic, political and cultural centre of life for the entire Palestinian population. But after decades languishing under destructive Israeli policies meant to isolate the city from the rest of the Occupied Territories and a lack of municipal services and investment, East Jerusalem has slipped into a state of poverty and neglect.

“After some 45 years of occupation, Arab Jerusalemites suffer from political and cultural schizophrenia, simultaneously connected with and isolated from their two hinterlands: Ramallah and the West Bank to their east, West Jerusalem and Israel to the west,” the International Crisis Group recently wrote.

Israeli restrictions on planning and building, home demolitions, lack of investment in education and jobs, construction of an eight-foot-high separation barrier between and around Palestinian neighbourhoods and the creation of a permit system to enter Jerusalem have all contributed to the city’s isolation.

Formal Palestinian political groups have also been banned from the city, and between 2001-2009, Israel closed an estimated 26 organisations, including the former Palestinian Liberation Organisation headquarters in Jerusalem, the Orient House and the Jerusalem Chamber of Commerce.

Extreme poverty

Israel’s policies have also led to higher prices for basic goods and services and forced many Palestinian business owners to close shop and move to Ramallah or other Palestinian neighbourhoods on the other side of the wall. Many Palestinian Jerusalemites also prefer to do their shopping in the West Bank, or in West Jerusalem, where prices are lower.

While Palestinians constitute 39 percent of the city’s population today, almost 80 percent of East Jerusalem residents, including 85 percent of children, live below the poverty line.

“How could you develop [an] economy if you don’t control your resources? How could you develop [an] economy if you don’t have any control of your borders?” said Zakaria Odeh, director of the Civic Coalition for Palestinian Rights in Jerusalem, of “this kind of fragmentation, checkpoints, closure”.

“Without freedom of movement of goods and human beings, how could you develop an economy?” he asked.

“You can’t talk about independent economy in Jerusalem or the West Bank or in all of Palestine without a political solution. We don’t have a Palestinian economy; we have economic activities. That’s all we have,” Odeh told IPS.

Israel’s separation barrier alone, according to a new report by the United Nations Conference on Trade and Development (UNCTD), has caused a direct loss of over one billion dollars to Palestinians in Jerusalem, and continues to incur 200 million dollars per year in lost opportunities.

Israel’s severing and control over the Jerusalem-Jericho road – the historical trade route that connected Jerusalem to the rest of the West Bank and Middle East – has also contributed to the city’s economic downturn.

Separation of Jerusalem from West Bank

Before the First Intifada (Arabic for “uprising”) began in the late 1980s, East Jerusalem contributed approximately 14 to 15 percent of the gross domestic product (GDP) in the Occupied Palestinian territories (OPT). By 2000, that number had dropped to less than eight percent; in 2010, the East Jerusalem economy, compared to the rest of the OPT, was estimated at only seven percent.

“Economic separation resulted in the contraction in the relative size of the East Jerusalem economy, its detachment from the remaining OPT and the gradual redirection of East Jerusalem employment towards the Israeli labour market,” the U.N. report found.

Decades ago, Israel adopted a policy to maintain a so-called “demographic balance” in Jerusalem and attempt to limit Palestinian residents of the city to 26.5 percent or less of the total population.

To maintain this composition, Israel built numerous Jewish-Israeli settlements inside and in a ring around Jerusalem and changed the municipal boundaries to encompass Jewish neighbourhoods while excluding Palestinian ones.

It is now estimated that 90,000 Palestinians holding Jerusalem residency rights live on the other side of the separation barrier and must cross through Israeli checkpoints in order to reach Jerusalem for school, medical treatment, work, and other services.

“Israel is using all kinds of tools to push the Palestinians to leave; sometimes they are visible, and sometimes invisible tools,” explained Ziad al-Hammouri, director of the Jerusalem Centre for Social and Economic Rights (JCSER).

Al-Hammouri told IPS that at least 25 percent of the 1,000 Palestinian shops in the Old City were closed in recent years as a result of high municipal taxes and a lack of customers. “Taxation is an invisible tool…as dangerous as revoking ID cards and demolishing houses,” he said. “Israel will use this as pressure and as a tool in the future to confiscate these shops and properties.”

Maram frets that she's fat. Tony says men don't care how they look. Shahd thinks nose jobs are fine.

It may sound like usual talk-show blather until you consider that the three commentators are preteen children. And something far more unusual for Israeli television: They are Arabs.

Every week, Maram abu Ahmad, 12; Tony Khleif, 11; and Shahd Shahbari, also 11, get together on camera with an adult host to discuss, in Arabic, their lives and views during freewheeling chats that regularly veer into the minefields of politics and identity.

The children have aired opinions on religion, their relations with Israel's majority Jews and the ever-tricky issue of being Arabs who are citizens of the Jewish state. (Maram got in trouble with her mother by saying on air that she considered herself Israeli, not Palestinian.)

They also have discussed homosexuality, Iran and the United States. The children hammered President Bush for the Iraq war -- Tony declared him a "dictator" -- but they praised the United States for pretty landscapes, hamburgers and hip-hop. A recent taping focused on beauty and image, at one point delving into what physical characteristics Arabs prefer. (All three said blond hair and blue eyes.)

"I want everyone to hear my thoughts," Maram, with lively brown eyes and braces, said before a recent taping. She writes songs in English and dreams of directing animated movies. Maram, who is Muslim, said she wants Jewish viewers "to think that we are smart, that we know how to express our feelings."

The half-hour program, called "Haki Kibar," or "Grown-Up Talk," is part of a new effort by the country's dominant commercial broadcaster, Channel 2, to put more Arab citizens on the small screen. Arabs make up a fifth of the Israeli population, but they are almost never seen on locally produced television.

Prodded by governmental regulators and by Arab-rights activists who have long complained of discrimination, the broadcaster has hired a full-time diversity director and, in addition to the children's program, begun to add Arabs to some of its most popular shows, including Israel's version of "American Idol."

The children's talk show, produced by an Arab-run company in the northern city of Nazareth, has aired weekly since late summer, albeit during a daytime slot when viewers are scarce. The program, which carries Hebrew subtitles, also features a separate segment with a trio of 8-year-olds with the same host, comedian Hanna Shammas.

The children sit snug on a couch, clutching pillows and fidgeting as they respond on the spot to improvised questions relayed to Shammas by an editor in the control room.

The studio, painted cherry red and canary yellow, is decorated with stuffed animals to evoke a playroom. But the subject matter is often startlingly grown-up, as when the younger threesome was asked which side was responsible for Israel's war last year with Hezbollah guerrillas in southern Lebanon. A skinny boy named Fares blamed Israel, but botched the facts by saying the Israelis had kidnapped three soldiers from Lebanon. (The war began after Hezbollah captured two Israeli soldiers from Israeli territory.)

In what may prove a riskier television venture, Keshet Broadcasting, one of the two companies that operate Channel 2, is readying a drama written by Sayed Kashua, a noted satirist, that offers a wry take on the challenges and foibles of an Arab family loosely based on his own. Most of the dialogue will be in Arabic, with Hebrew subtitles. (Hebrew portions will carry Arabic subtitles.)

One subplot will be a budding romance between a Jewish man and an Arab woman -- incendiary stuff for Israeli television. Even the show's title, "Arab Work," walks the edge by playing on a Hebrew phrase used to refer to slipshod work.

"It's a crazy adventure," said Udi Lion, an observant Jew who as director of special programming at Keshet oversees efforts to get more TV time for Israel's various underrepresented groups, including Ethiopian and Russian-speaking immigrants and devout Jews. "It can only be a hit or a catastrophe."

Still, these are baby steps in a land where Arab citizens complain of discrimination and social inequities extending far beyond their role on television. Advocates for Israel's 1.4 million Arabs say the reforms at Channel 2 are insufficient to reverse decades of media neglect.

Most Arabs in Israel skip local television and instead tune in shows via satellite from Arabic-speaking countries, such as Syria and Egypt, said Jafar Farah, director of the Mossawa Center, a Haifa-based advocacy group for Arabs in Israel.

The result is that ordinary Jews and Arabs, who don't talk to each other much in daily life anymore, are increasingly alienated from each other on television, he said.

"Jews don't see Arabs in media, and Arabs don't watch Israeli media," Farah said.

Few in Israeli television disagree with that assessment. Studies by private groups and the governmental agency that oversees the nation's two commercial television stations, Channels 2 and 10, have found an almost complete absence of Arabs on Israeli shows. Most of the time, a recent study found, Arabs are presented in the context of the Israeli-Palestinian conflict and thus in a threatening manner. A few Arab lawmakers are featured regularly to criticize Israel's policies, bringing them frequently into Israeli living rooms but gaining little affection for Arabs among Jewish viewers.

Israelis are unlikely to see ordinary Arabs talking about healthcare or raising children, said Dror Sternschuss, a former advertising executive who is chairman of Agenda, the Israeli group that did the study.

"If we want the Israeli Arabs to be and feel part of the Israeli community, they should see themselves on TV," said Sternschuss, who is Jewish. "If we want our children to have the ability to understand and live together with Arabs, they have to see them on TV."

Israeli regulators in recent years have imposed content quotas aimed at forcing broadcasters to air Arabs and other minorities more often, part of a wider effort to show a fuller picture of Israeli society.

The Mossawa Center went to court in 2003 to demand more Arabic- language productions and an increase in the number of Arab employees at the two commercial TV stations. In response to this and its own findings of neglect by television stations, the authority that oversees Channel 2 imposed as a requirement of the broadcaster's sale in 2005 that it commit at least 60 hours of airtime yearly to "peripheral" segments of the Israeli population. Regulators hope to make similar restrictions part of the operating rules for Channel 10 when it next comes up for bid in 2012.

That quota represents a tiny share of the total broadcast time. But perhaps more significant are the groundbreaking ways that Channel 2 is integrating Arabs into its programming. It has begun featuring them in popular prime-time shows, noted Ayelet Metzger, deputy director-general in charge of television at the Israeli agency responsible for the commercial stations.

At the urging of Keshet's Lion, the broadcaster wrote Arab families into two reality-type shows, "Wife Swap" and "Supernanny." The "Wife Swap" episode with the Arab family was the series' highest rated of the season. In that episode, the Jewish wife was treated warmly by an Arab family she went to live with, while the transplanted Arab wife and Jewish husband sniped at each other, which produced a wave of Internet chatter castigating the man's behavior toward her.

"This was a tremendous breakthrough," Metzger said. "A lot of this is happening because of what the regulation instructed."

This year, Arab singer Miriam Tukan drew a following by singing in Hebrew on "A Star is Born," a popularity contest modeled after "American Idol."

Tukan, with waist-length black hair and a lilting delivery that gave the songs an Arabic flavor, was voted off after making it to the pool of 10 finalists, much further than Lion had imagined possible when he first pushed the idea of an Arab contestant to skeptical executives at Keshet.

"I was surprised the Israeli public was mature enough to support her," Lion said.

He said that experience, along with favorable viewer response to a drama that has Russian-immigrant and ultra-Orthodox characters, is proof that offering a broader palette might also make shrewd business sense by helping Israeli television improve ratings.

Lion said Israel lags far behind U.S. television when it comes to diversity, even when compared with the age when blacks held only secondary roles.

"Until '[The] Cosby [Show]' came, and suddenly there was a doctor and in the program there could be adult black Americans -- we are behind that," he said.

Skeptics say Lion means well, but that the steps taken by Channel 2 are not ambitious enough to begin closing the gap between Jews and Arabs in the Israeli media. Few Arabs work in Israeli news departments, for example, and Lion said his assistant is the broadcaster's only Arab employee.

Even those who welcome the changes at Channel 2 say its efforts can seem halfhearted. Alarz, the company that produces "Grown-Up Talk," is paid only $2,000 per half-hour episode, according to company officials, too little even to cover its costs of taping and editing.

The program's time slot, at 1 p.m. on Fridays, is a ratings wasteland in Israel. Lion and the show's producers have desperately sought viewers by posting clips on YouTube (one example: http://www.youtube.com/watch?v= os9zhlZNsbc) and distributing the Web links to friends and anyone else who might want to see them.

Nizar Younes, general manager of Alarz, said the company hoped to sell the program to a broadcaster in the Arab world, such as Al Jazeera. Yet some of the show's subject matter, acceptable by Israeli standards, may be too racy for more conservative Arab societies.

The children say they hope to project an image of Arabs that is progressive, open-minded and modern. Whether they can change the minds of Jewish Israelis through a little-watched, half-hour show remains to be seen -- they see the limitations but insist on trying.

Jews think that "only they are supposed to be on TV, not us," Maram said. "If they see our show on Friday, maybe this will change their idea."

The music blared in Arabic as a knot of women twirled slowly around the bride-to-be. Well-dressed onlookers, some in traditional Muslim head scarves, clapped and swayed.

On this evening of celebration, the fireworks sizzled, sweets beckoned and jubilant guests congratulated the Arab bride's parents with a double kiss and hearty "Mazel tov!"

Mazel tov?

"It's very normal," said Nava Sonnenschein, one of the Jews clapping at the edge of the dance circle. "For here."

The usual rules of the Middle East often don't apply in Neve Shalom, founded in the 1970s as a utopian village on a hilltop in Israel's midsection. For nearly three decades, its inhabitants have sought to defy the polarizing tugs of politics and nationalism.

Though most Jews and Arabs in Israel are kept apart by segregated communities and long years of mutual mistrust, Neve Shalom and its 250 residents -- half Jews, half Arab citizens of Israel -- represent a living experiment in integration.

The tree-shaded hamlet, whose name means "Oasis of Peace," is defiantly mixed, its bougainvillea-splashed lanes a mishmash of stone Arab-style houses and boxy, modern Jewish homes.

Schoolchildren learn Hebrew and Arabic together, a rarity in Israel, and play at one another's homes. Residents enjoy an equal say in running affairs and have elected Jews and Arabs as mayor. They also share management of the 120-pupil elementary school, which draws many students from outside the village, and a separate School for Peace, a well-known training center for activists.

The community's name is in both languages. In Arabic, it is Wahat al Salam (though the Israeli government has never recognized that part).

"We don't go out and protest in the classic way," said Ahmad Hijazi, a 40-year-old Arab who moved from northern Israel with his wife in 1992 and is now Neve Shalom's development director. "We live, and put into practice, what we want to see."

A half-hour's drive from Jerusalem, Neve Shalom is both a functioning community and a peace movement showcase. It has a website -- http://nswas.org -- and a parking lot for buses.

But this is no theme park. The affections and hurts are real, the gains and setbacks intimately felt. Alongside its taboo-breaking, the community has shown how hard it can be for Jews and Arabs to fully understand each other, even when they are trying.

Few know better than Abdessalam Najjar, a 55-year-old village leader with a balding head and pencil-thin beard tracing his jawline. Najjar, the father of the bride, moved to Neve Shalom in 1979 with a new wife, Ayshe, and a heart full of hope.

He was 27 and willing to take a chance, she 19 and in need of some persuading. Najjar, a devout Muslim, had been involved in discussion groups with Jews while studying at a branch of Hebrew University in nearby Rehovot. Clashes between Arab demonstrators and Israeli authorities a few years earlier that left six Arabs dead had generated new urgency over trying to improve relations.

The Najjars were the first Arab family to join Neve Shalom. Almost 30 years later, they are mainstays, well-liked and respected across the community. Najjar has been mayor and is working with a Jewish colleague in developing the community's new spiritual center for interfaith conferences, lectures on peace topics and prayer.

The couple built a life and home in Neve Shalom, "slowly, brick after brick," Najjar said. After the arrival a year later of the first of their four children, Ayshe watched over the village's growing crop of babies -- Jews and Arabs -- and he turned his efforts to helping start the village's bilingual school. He was one of two teachers.

He says residents have succeeded in creating an environment for raising tolerant children. For the grown-ups too there have been learning opportunities and innumerable debates, important and petty. Najjar, for example, has argued with his mostly secular Jewish neighbors over his right to pray at work and over whether he could keep a few sheep at home, as many rural Palestinians do. (He lost that one.)

Najjar said he once believed that conflicts break out only "between bad people." No more.

"This conflict can be between two good guys," he said.

Neve Shalom's residents, mostly left-leaning professionals and academics, have been tested by two Palestinian uprisings, war in Lebanon and a steep deterioration in relations between Jews and Arabs in Israel. At times, the two groups here triumphed over those divisive pressures. At others, they fell prey.

To much of the rest of Israel, Neve Shalom is a harmless if worthy novelty. But Jewish extremists once declared the Jews here traitors and sprinkled nails on the road to pop tires. The village's Arab residents, who refer to themselves as Palestinian citizens of Israel, often are asked by fellow Arabs if they really believe that Jews can accept them as equals.

The village today carries tempered aspirations and scars from past political fights. Not all of these are over yet.

Jewish and Arab residents spar over whether Neve Shalom Jews should perform compulsory service in the Israeli army. Arabs in Israel are not summoned to serve, and many object to residents of a "peace village" enlisting in the army.

They disagree too on some of the issues at the heart of the Israeli-Palestinian conflict, such as what to do about Palestinian refugees who fled homes in present-day Israel during the 1948 war and their descendants.

Arab residents are resentful that, despite the talk of equality, Hebrew is the village's lingua franca. While the Arabs learned Hebrew by attending Israeli schools, few grown Jews in Neve Shalom have mastered Arabic.

Some residents from both groups, now in middle age, fear that the village has lost some of its political daring. It is perhaps telling that the burning issue these days is not potential peace talks but whether Neve Shalom residents can formalize their hold on the plots where they built homes years ago on land that was shared without private ownership.

"There are so many things we don't talk about," said Ayelet Ophir-Auron, 51, a Jewish special-education consultant who moved to the village with her family four years ago.

But residents say it may be success enough that Neve Shalom has managed to sustain its vision of mutual tolerance in a society with deep inequities between Jews and minority Arabs, who make up a fifth of Israel's population.

They assert that the project still has drawing power, even if it is from the fringe of Israeli society, and point to a waiting list of potential newcomers. The village is full but hopes to begin adding 90 families in the next year or so by turning some of the vacant land surrounding it into housing lots.

"It is enough that we are here," said Rayek Rizek, 52, an Arab former mayor who with his wife runs a cafe and gift shop at the entrance to the village. "It will never maybe bring the solution to the conflict. But there is still a small idea that maybe it is a candle in the midst of a big darkness."

Neve Shalom, a short drive off the main highway between Jerusalem and Tel Aviv, looks from its hilltop over a panorama of rural tranquillity -- a sloping, rock-strewn plain turned paper-dry by late summer, and groves of almond and olive trees. The village is arrayed around an oval drive, shaded by evergreen trees and other plantings that have swaddled a once-barren hilltop.

Village business takes place in the two-story administration building. Two resident committees run the village and, separately, the elementary school, School for Peace and spiritual center. Key decisions, such as passing the budget and picking new residents, are voted upon by village members in the style of a town meeting.

Neve Shalom has no stores other than the cafe-gift shop, though it sports a 39-room guest house. Its swimming pool is frequented by visitors from as far away as Jerusalem. Most of the community's middle-class residents commute to jobs in Tel Aviv and elsewhere.

The village is a far cry from the rough encampment that Rizek and his wife, Dyana Shaloufe-Rizek, encountered when they arrived in 1984.

Neve Shalom had been founded a decade earlier by a Dominican priest, Bruno Hussar, on a thistle-covered hill leased from a nearby Roman Catholic monastery. Father Bruno, who was born to Jewish parents, envisioned a place where people of different faiths could live together, though without a fixed political ideology.

Neve Shalom's first young couples arrived in 1978, motivated by the chance to craft an egalitarian way of life between Jews and Arabs. The village looks out over the site of a key battle in the 1948 war that broke out with Israel's independence.

Shaloufe-Rizek, who had been a student activist at Haifa University, was invited to teach at Neve Shalom's peace school, which she had attended after its establishment in 1979. Newly married, she brought her husband.

"There was nothing. No paved roads. A lot of flies and mosquitoes," Rayek Rizek recalled.

But it was an exhilarating place for Jews and Arabs to confront their yawning ignorance about one another.

Dorit Shippin, a Jew, arrived with her husband, Howard, the same year as the Rizeks after searching for a community that was, she said, "pluralistic enough and open-minded." She recalled being stunned to learn that Israel's Independence Day was treated as a historical catastrophe by her new Arab neighbors.

"My father participated in the 1948 war, and especially for this generation, the stories that they have are not stories of destruction and deportation of Palestinians, but they are stories of conquering, freeing, friendships and survival," Shippin said. "It was quite shocking to hear the other side of the picture."

For their part, Arab residents began to assume the burden of shared leadership and to confront a fuller portrait of Jews than the unflattering images many had grown up with.

The community's discussions were earnest, often heated. But the outbreak of the first intifada in 1987 drove home for many residents the fundamental gap that remained in how each side viewed the world.

"The Palestinians saw it mostly as a kind of legitimate struggle of the people under occupation, and the Israelis saw it as an unnecessary kind of uprising that threatens their life, and their existence here," Rizek said.

Some residents wonder, though, whether the community too often has steered around explosive issues to preserve neighborly harmony.

"As the years went by, it became more and more challenging to talk about the difficult issues," said Boaz Kitain, a Jew who has been mayor and run the elementary school and School for Peace. "We stopped talking about the difficult things."

The community was thrown into turmoil when Kitain's 20-year-old son, Tom, an Israeli soldier, died in a helicopter collision en route to Lebanon in 1997.

The Kitain family asked to put up a memorial. But some Arab residents found it unthinkable that a community dedicated to peace would commemorate a soldier on a military mission, even one who had grown up in their midst. The debate grew bitter. To the Kitains, it only aggravated their grief.

Despite an eventual compromise -- a plaque on the village basketball court saluting a "son of peace, killed in war" -- the episode proved damaging. Kitain's wife, Daniella, once active as fundraiser for the village, withdrew from community affairs. She has never rejoined.

Community relations have fared better since then, despite the buffeting effects of the second intifada, which further worsened Jewish-Arab relations in Israel, and the nation's war against the Shiite Muslim militia Hezbollah in Lebanon last year.

Both times, Neve Shalom's residents threw themselves into common action. After the second intifada broke out in 2000, they formed a motorcade to show support for families of 13 Arabs killed during rioting and delivered medical aid to Palestinians in the West Bank, a big swath of which sits within a 30-minute drive.

"This is when residents felt even more that we have to come together and try to do something for the outside," said Hijazi, the development director.

There is also much thinking here about the future.

The community plans to keep up its education efforts, mainly through the School for Peace, which over the years has provided training workshops for 40,000 peace and human rights activists and others. Supported heavily by foreign donations, it has served as an incubator for the Israeli and Palestinian peace movements, with alumni sprinkled among important activist groups on both sides.

A planned residential expansion, which would nearly triple the number of families to almost 150, could lend the project more symbolic clout by increasing its size.

Some residents are urging a more activist role for the community in Israeli politics at a moment when polls show abysmal relations between Jews and Arabs.

"It's time for us to go out more, even if they don't want to hear us," Dorit Shippin said. "We have to stop apologizing, really, and be relevant."

The community claims a tangible accomplishment in rearing a generation of children to have friends across lines of religion and ethnic origin. Those young people have at times been unnerved by how much the egalitarian ideals of Neve Shalom clash with the stark realities of wider Israeli society.

"It's like a dream," said Sama Daoud, a 19-year-old Arab who lives with her parents in Neve Shalom. "It's different from the outside."

Tali Sonnenschein, 15, said she and her friends were well aware of the tensions and stereotypes that cleave the world outside Neve Shalom.

She sees no reason, though, why that should stop her little community from seeking some way out of the mess.

"I get to live in this place and have a different opinion -- that everybody can learn to live together," she said. "It's a little cheesy, maybe. But that's what I learned."

Israel on Wednesday declared the Hamas-run Gaza Strip as "hostile territory," setting the stage for possible cutoffs of fuel and electricity and overshadowing a visit by U.S. Secretary of State Condoleezza Rice to prepare for a November peace conference.

Israel did not say when it might cut the flow of power or fuel to the impoverished coastal enclave. Prime Minister Ehud Olmert's office issued a statement saying his government would study the legal ramifications before imposing such sanctions and would seek to avoid a humanitarian crisis. Israel also said it might further curtail the movement of non-humanitarian goods into Gaza.

Israeli officials have yet to find an answer to the Gaza-based militants who routinely fire homemade Kassam rockets into southern Israel, despite limited military raids and numerous airstrikes. The designation Wednesday by a group of ranking government ministers known as the "security Cabinet" was meant to increase pressure on Hamas to halt the salvos. Israel is the sole source of fuel for Gaza and supplier of most its electricity and basic goods. Cutting supplies would make life more difficult for Gaza's 1.5 million residents, who have endured months of border closures.

The security Cabinet's decision drew swift denunciations from United Nations Secretary-General Ban Ki-moon and human rights activists, who argued that halting fuel and power would amount to collective punishment, a violation of international laws protecting civilians. "They should not be punished for the unacceptable actions of militants and extremists," Ban said in a statement urging Israel to reconsider.

Rice, speaking at a news conference with Israeli Foreign Minister Tzipi Livni, did not endorse the Israeli move but noted that Hamas is a "hostile entity to the United States as well." The U.S. "will not abandon the innocent Palestinians in Gaza and indeed will make every effort to deal with their humanitarian needs," Rice said.

Livni defended the legality of the government's decision, saying Israel was not responsible for allowing deliveries to Gaza beyond humanitarian goods. She said Israel was distinguishing between Palestinian moderates, such as Palestinian Authority President Mahmoud Abbas, and extremists. But Abbas' office joined his Hamas foes in denouncing the move. Abbas' Fatah faction was driven from Gaza by the Islamist movement in June, and now controls only the West Bank.

Rice also met with Olmert and other Israeli officials to lay the groundwork for a U.S.-sponsored regional peace conference that is already looking shaky. Her visit, which ends today after meetings in the West Bank with Abbas and Palestinian Authority Prime Minister Salam Fayyad, was designed to build momentum for the planned meeting in Washington.

But top Palestinians and other Arab leaders have been saying that there is little point in attending a conference that doesn't produce substantive progress toward ending the Israeli-Palestinian conflict. "We want to be as supportive as possible of this bilateral dialogue," Rice said. "We are hopeful that it can move forward to common understandings of a way forward to the creation of a Palestinian state."

President Bush announced in July that he would call Middle East leaders together for talks aimed at creating a Palestinian state. But plans for the meeting remain vague. The administration has yet to announce who will attend, how the meeting will be organized and what results are expected. Palestinians want the conference to yield an agreement that lays out the framework of a final peace, with a timetable for reaching terms on Palestinian statehood. Israel favors a more general declaration that is vague enough to prevent a rebellion among rightist members of Olmert's governing coalition.

In recent private meetings, Olmert and Abbas have broached some of the conflict's core issues. These include the borders of a Palestinian state, the fate of Palestinians who fled their homes in what is now Israel before and during its 1948 war for independence and their descendants, and the status of Jerusalem. The two sides have set up negotiating teams to delve into issues that would be ironed out in any peace agreement.

Some analysts say chances for reviving the peace process, frozen since 2001, have improved since Hamas, which won Palestinian parliamentary elections in January 2006, seized sole control of Gaza. The violent split left Israel and the United States with a chance to ignore Hamas and deal solely with Abbas. Abbas' political allies in Fatah warn, though, that coming away from the November meeting without concrete signs of progress could undermine his already weakened standing with the Palestinian public.

Egypt, Jordan and Saudi Arabia also have expressed reservations, raising doubts about whether some of the region's most loyal U.S. allies would attend. Olmert, also a weakened leader, has sought to tamp down speculation of any dramatic agreement. Right-wing politicians are up in arms over news reports that he was ready to make concessions, including dividing Jerusalem between Israel and the Palestinians.

Olmert told members of his centrist Kadima party that he is aiming for agreement on a nonbinding declaration of intent. That would fall short of Palestinian demands.

The Palestinian economy has become weaker and more dependent on foreign aid as the private sector has atrophied because of political violence and Israeli restrictions on the movement of goods and people, the World Bank said today.

The report, which focuses on trends during the last two years, found conditions especially severe in the Gaza Strip, where unemployment rose to almost 35% last year and more than a third of residents were living in severe poverty.

The bank said overall gross domestic product, a key gauge of economic health, had dropped by nearly a third since 1999, the year before the outbreak of the Palestinian uprising. Per-capita GDP was $1,129 last year, compared with $1,612 in 1999, the bank said.

The report said foreign assistance to the Palestinians reached a record $1.4 billion in 2006, but that went mostly for day-to-day government costs, such as salaries, rather than development projects that can yield long-term economic benefit. The number of Palestinian public employees grew to 168,000, a 60% jump from seven years earlier.

The bank predicted the Palestinian Authority would need $1.6 billion yearly to cover its mounting budget deficit.

"More troubling than the negative growth rate is the changing composition of the economy," the report says. Economic activity "is being increasingly driven by government and private consumption from remittances and donor aid, while investment has fallen to exceedingly low levels."

Years of violence between Israel and the Palestinians had already damaged the Palestinian economy, but money grew tighter last year after the militant group Hamas won parliamentary elections. Israel cut off about $50 million in monthly transfers of tax and customs revenues, and the United States and European Union stopped direct aid because they consider Hamas a terrorist group.

Aid eventually was funneled to Palestinian Authority President Mahmoud Abbas of the Fatah movement through mechanisms devised to skirt the Hamas government.

The bank report warns that the private sector risks collapse in Gaza, where Israel's closing of border crossings has halted the flow of exports and the delivery of raw materials.

The main cargo crossing at Karni was closed off and on after Israel withdrew from the Gaza Strip in September 2005. Since June, when Hamas routed Fatah forces and seized control of the coastal enclave, Israel has kept the area closed off, citing fears of attack by militants based there. Limited supplies of humanitarian goods have been passed through two other crossings into Gaza.

Israel has renewed tax transfers to Abbas' government, which still controls the West Bank, and the West has resumed aid.

Most of Gaza's factories have shut down, leading to layoffs likely to affect an estimated 30,000 industrial workers and aggravating dismal economic conditions, the bank report says.

Economic erosion threatens to undo the benefits gained from $10 billion in previous aid, it says. The bank urged Israel to loosen travel restrictions in the West Bank, where checkpoints and roadblocks hinder economic activity.

The report asserts that any program to resuscitate the Palestinian economy must include Gaza, which it calls a "quintessential part of the Palestinian territory, economy and identity."