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.”

Just over a week before Israel holds elections to choose a new government, the outcome of the war in the Gaza Strip has emerged as a central issue in the campaign, with the candidates sparring over whether the massive military operation went far enough.

The argument reflects the reality that elections here often turn on a single question: Who looks tougher on national security?

The war, initiated to stop Hamas rocket fire that has persisted for years, was viewed by many here as motivated at least in part by electoral politics. Two of the three Israeli architects of the war, Defense Minister Ehud Barak and Foreign Minister Tzipi Livni, are candidates to become the nation's next prime minister.

The operation in Gaza drew condemnation abroad for the high Palestinian death toll, and praise at home for the relatively low number of Israelis killed. But it has not done much to elevate Barak's or Livni's prospects of winning the top job. Now their even-more-hawkish opposition is on the offensive.

In recent days, former prime minister Binyamin Netanyahu, who according to polls appears poised to reclaim his old job, has argued in speeches and interviews that his political rivals ended the war prematurely. Israel, he says, should have destroyed Hamas -- which he views as an outpost of Iranian power on Israel's southern border -- rather than withdrawing amid a shaky cease-fire. He has left little doubt over what he would do if elected.

"The next government will have no choice but to finish the work and remove the Iranian terror base for good," he said in a radio interview last week.

One of his top lieutenants in the right-wing Likud party, Zeev "Benny" Begin, was even more emphatic at a rally in Jerusalem, describing the military operation in Gaza as a failure. "One million Israelis remain under the threat of rockets," Begin, son of Israel's first Likud prime minister, Menachem Begin, told a cheering crowd. "After this operation, the terrorists came out of their hiding places waving not white flags but the green flags of Hamas."

In Israel's fractious political culture, left and right are generally determined by a party's relative willingness to cede land to the Palestinians in exchange for a peace deal, as well as by its criteria for going to war.

Netanyahu's Likud has generally been critical of U.S.-backed negotiations between Israel and the West Bank-based Palestinian Authority, which are aimed at creating a Palestinian state. Netanyahu has also advocated an uncompromising stand against Iran, particularly when it comes to that country's nuclear ambitions. But during his tenure as prime minister in the late 1990s, he demonstrated a willingness to govern more pragmatically than he had campaigned, agreeing to a limited peace accord with the Palestinians on control of the West Bank city of Hebron.

Likud's criticism of the recent Gaza operation is aimed squarely at Netanyahu's two main rivals for the prime ministership, Livni and Barak. They have strongly defended the conduct of the military campaign, while also hinting that Israel is not finished in Gaza and that there could be more attacks before the Feb. 10 elections.

"We are on the right course to achieve peace and quiet," Barak, leader of the center-left Labor Party, told students in the seaside city of Herzliyya. "The operation had real accomplishments. Our deterrence has been restored. Hamas was dealt a blow like no other since its creation."

But he also vowed that Israel would "keep one hand on the pistol."

Beginning Dec. 27 with a surprise air assault, Israeli jets pounded Gaza for 22 days and nights, with tanks overrunning large swaths of the coastal territory.

Approximately 1,300 Palestinians died in the operation, about half of them civilians, according to Gazan medical officials. Thirteen Israelis were killed, three of them civilians.

Israeli Prime Minister Ehud Olmert said in launching the war that the intent was to stop the persistent rocket fire from Gaza into southern Israel and to end the smuggling of weapons into Gaza from Egypt.

But when the dust cleared, Hamas declared victory and quickly reasserted its control over the strip. In the two weeks since the cease-fire took effect, the smuggling has resumed, scattered rocket fire has continued and an Israeli soldier was killed last week in an attack carried out by a radical splinter group of Hamas that does not support the cease-fire. Hamas itself denied involvement but praised the killing.

On Sunday, Palestinian fighters launched about a dozen rockets and mortar shells toward Israel, slightly injuring at least three people, according to the Israel Defense Forces. Olmert, in his weekly cabinet meeting, vowed that Israel's response to the attacks would be "disproportionate." Since the cease-fire took hold, Israel has responded to attacks from Gaza with periodic airstrikes aimed at Hamas fighters and at tunnels.

Although Israel won the war by almost any military standard, Hamas's resilience has provided a political opening for Netanyahu. For more than a year before the government launched the operation, he had agitated for war from his seat as leader of the opposition. During the operation, he was a vocal supporter.

But since it ended, he and his party have gone into attack mode, accusing the government of weakness for not killing top Hamas leaders or reclaiming the strategically important Philadelphi corridor, which runs along the Gazan-Egyptian border and is dotted with smugglers' tunnels. Netanyahu and his allies have tried to paint the decision to halt the operation as just another failure of the ruling Kadima party, which also spearheaded Israel's disengagement from Gaza in 2005.

The argument seems to be working: Netanyahu has consolidated his position as the election's front-runner in recent weeks, despite his opponents' orchestration of a popular war.

"If Likud was in power, the operation would not have ended. It started well, but it ended too soon," said Leon Amoyal, a 59-year-old retiree who traveled to Jerusalem from the northern city of Haifa this week to cheer Netanyahu. "We could have eradicated Hamas."

Netanyahu got a boost last week when one of the operation's key commanders, reserve Brig. Gen. Zvika Fogel, publicly declared that Israel had missed "a historic opportunity" to crush Hamas's military capabilities.

"Hamas was really at a breaking point," said Fogel, who commanded artillery and other units. "We should have turned up the pressure."

Instead, he said, Israel's political leaders first stalled the operation, then pulled the plug, announcing a unilateral cease-fire Jan. 17. Fogel said he believed the decision was made to avoid heavy Israeli casualties in the weeks before an election and to spare President Obama from having to deal with the war during his first days in office. "On January 20th, they didn't want to see the TV screen divided in two parts -- one for the ceremony and the other for the war," he said.

But backers of Livni and Barak say the war ended at just the right moment. In 22 days of fighting, they say, Israel achieved its goals without being drawn into a quagmire. Throughout the war, military planners worried that Israel would sustain high casualty rates if it sent large numbers of ground forces into Gaza's densely packed cities and refugee camps in search of Hamas leaders. They also fretted over what would come next if they really did destroy Hamas: The relatively moderate Fatah movement has little organized presence in Gaza, and a power vacuum in the strip could lead to an even more dangerous situation for Israel.

At a question-and-answer session with students at the Hebrew University of Jerusalem last week, Livni cited her own diplomatic efforts as crucial, first to keeping the war going despite international pressure for it to end, and then to bringing about a responsible conclusion.

Netanyahu, she said, is "an extreme ideologist" who may know how to fight but won't know how to work with allies, including the United States, to achieve peace.

Livni, wary of looking soft, also spoke out forcefully against Hamas and said Israel will continue to strike at the group when necessary. Her party, Kadima, has featured images of tanks rolling into Gaza in its advertisements, part of a bid to toughen her image.

Livni, who took control of the centrist Kadima last year after Olmert stepped aside amid corruption charges, is running second in the polls, with Labor's Barak a distant third.

During the Gaza war, all of the first-tier parties, as well as many of those in the second tier, favored the decision to fight. Even a party considered to be a stalwart of Israel's peace camp, Meretz, initially backed the war, although it later called for a cease-fire. The party's campaign does not highlight Gaza, focusing instead on education and social issues.

During Livni's Hebrew University speech, several dozen backers of one group that did oppose the war -- the small leftist party Hadash -- rallied outside, though their voices could not be heard in the auditorium.

Members said later that they see no significant differences among the major candidates for leadership in Israel.

"They're two faces of the same coin," said Hanaa Mahamid, 24, a student and an Arab citizen of Israel. "All of them are war criminals."

When members of the Sultan family ran from their home as an Israeli tank shelled its northern wall, there was no time to shut the front door. There was also no need.

The house, which family patriarch Samir al-Sultan began building at the age of 15, was all but destroyed as Israeli forces advanced into the Gaza Strip in early January, turning the house's contents into a mangled mess of glass and mortar.

With no home to return to and no prospects for rebuilding, the Sultans on Thursday were among the thousands of Palestinians in Gaza searching for somewhere to go.

Israel's 22-day war on Hamas, the Islamist movement that controls Gaza, forced 50,000 people into shelters, according to U.N. officials. They say 15,000 remain in such facilities because of damage to their homes -- with countless more finding refuge in the care of relatives.

In the aftermath of the war, there are scenes of devastation at nearly every turn in Gaza. Whole blocks are pockmarked by bullet holes. The earth craters where tall buildings once stood. Mourning tents line the roadways.

Even as many Gazans attempt to return to a normal life -- going to work and shopping in the market -- those displaced during the fighting remain a prominent part of the landscape: By day they return to what is left of their homes to keep watch, building fires to stay warm and picking through the debris in search of valuables. By night they sleep in the living rooms of aunts and uncles or, as in the case of the Sultans, in crowded elementary-school classrooms that have become a temporary refuge -- though for how long no one knows.

The Sultans have moved three times in the 19 days since they fled their home, the family said, giving a more detailed account of their travails than they earlier provided The Washington Post.

In one U.N.-run shelter, their 20-year-old son Abdullah visited the bathroom on the night of Jan. 5 to fetch his mother some water. An Israeli airstrike killed him on the spot, along with two of his cousins.

They are among the estimated 1,300 Palestinians who died in the war, with 5,000 more injured. Thirteen Israelis were killed after Israel began its assault Dec. 27, citing persistent Hamas rocket fire into southern Israel.

The Israeli military says it took all possible precautions to avoid civilian casualties as it fought an enemy embedded among the populace, and also attempted to spare the homes of those who were not involved in violence against Israel.

The Sultans say they fit that description, but their building was fired on nonetheless. The destruction of the family home, which they discovered after the cease-fire, has deepened their sense of grievance.

"They destroyed everything," said Intisar al-Sultan, 50, who lived in the three-story house with her husband, three sons, daughter-in-law and grandson. "They kept nothing. No trees. No animals. Even our clothes are gone. We don't know where to go. We have nothing."

During a visit to Gaza on Thursday, U.N. humanitarian chief John Holmes said finding shelter for those displaced by the war was among the most urgent needs of the recovery effort. He called for Gaza's crossings -- which have been largely sealed shut for the past 19 months as a result of an Israeli blockade against Hamas -- to open to allow in building supplies. "Goods have to be able to get in freely and in the right quantities, including construction materials, so that reconstruction can start," he said.

But the question of who will fund and manage the reconstruction has become a sensitive one. There are still no firm plans for how it will proceed, and there is as yet little evidence of any rebuilding on the ground.

Hamas said Thursday that beginning on Sunday, the group intends to distribute up to $5,000 in cash to families whose homes have been destroyed. Families whose homes have been significantly damaged, but are still standing, would get about half that, Hamas spokesman Taher al-Nono told reporters in Gaza.

The Palestinian Authority, which holds sway in the West Bank but has not had an organized presence in Gaza since June 2007, when Hamas ousted forces loyal to the Fatah party that dominates the authority, said Israel so far had blocked it from sending assistance.

U.S. officials have signaled that they would like for the Palestinian Authority to take the lead in the reconstruction in order to enhance its battered image among Palestinians. Hamas is considered a terrorist organization by Israel, the United States and the European Union.

Regardless of who manages the effort, the United Nations says it intends to be a major player in the reconstruction, which it is estimated will cost more than $2 billion.

Christopher Gunness, spokesman for the U.N. Relief and Works Agency in Gaza, said rehabilitating homes that are damaged but still livable will be among the first priorities. Others will have to wait. "If your house is completely flattened, that will come later," he said. But until then, he said, "nobody is going to be thrown out on the streets."

Still, with most shelters packed to the point where 30 people are sleeping in a single classroom, the standards for who can stay and who must go are becoming stringent.

"We have two types of families here -- those whose homes were completely destroyed and those whose homes were half-destroyed," said the manager at one U.N. shelter, who cited agency policy in not giving his name. "If you have at least one room left in your home that's livable, you have to leave. The ones whose homes were completely destroyed can stay."

The Sultans can stay. Although technically their home still stands, the entire northern wall is gone, and the ceilings contain jagged cracks that reveal glimpses of the floors above.

So far, family members say, no one has offered to help them rebuild. The $5,000 promised by Hamas would not go far; in Gaza, where construction materials are scarce, even a relatively modest house can cost $100,000 or more to build.

And in any case, Samir Sultan, 52, said he would be reluctant to accept money from the group. Already, he has turned down offers by both Hamas and Fatah to pay for his son's funeral. His son, he said, was not a member of either party, and he said the family has not been involved in any violence against Israel.

He said he forbade Palestinian fighters to use his land to fire rockets against Israel, although he acknowledged that Hamas had a presence in the area. "My neighbor's house belongs to Hamas. And nothing happened to them," he said, pointing to a nearby home seemingly unscathed by the war as he kicked at a shattered bathroom sink in what remains of his second-floor bathroom.

The Sultan home in the northern town of Beit Lahiya overlooks the Mediterranean Sea to the west, farmland to the east and Israel to the north. For 12 years, Samir Sultan worked in Israel at an aluminum factory, learning Hebrew and earning enough money to significantly expand a small house he had built on his father's bean fields.

But eight years ago, amid rising violence, the border with Israel was shut and Sultan lost his job. Since then, he has eked out a meager living by selling fruits and vegetables from the back of a donkey cart.

On the morning of Jan. 3, Sultan took a white flag with him as he entered his back yard to feed the donkey. As he was returning to his house, he said, shots came from the fields to the north. The donkey fell, killed in an instant, and Sultan and his family sprinted down a narrow, sandy path to his daughter's house. Three days later, advancing Israeli tanks forced them to flee again, this time to a U.N.-run school in Gaza City.

"We were told that in the shelters, we would get protection," said Intisar Sultan, as she clutched a framed photo of her youngest son and softly cried. "But they kicked us out of our homes, and they followed us to the shelters to kill our sons."

She sent Abdullah to get water the night of Jan. 5 and never saw him again. Witnesses said his body was cut into dozens of pieces by an Israeli missile strike.

Maj. Avital Leibovich, a spokeswoman for the Israel Defense Forces, said that the matter was under investigation but that "what we understand is that there was an exchange of fire in that area." In general, she said, Hamas adopted a strategy of taking cover in urban neighborhoods and posting fighters and explosives in schools and medical centers.

The United Nations has denied that its schools were used as a cover for fighters.

After Abdullah was killed, the Sultans moved to another U.N. school, where they remained Thursday afternoon, still wearing the same clothes they had fled in. They sleep on thin mattresses, with dozens of extended family members sharing the same classroom floor. Infections are common at the school. A grandson, who is 18 months old, has been sick with a fever for a week, family members say.

As the sun set in Gaza on Thursday, the shelter manager said it would likely be the last night that anyone slept there. The students need their school back, he said. Those who still lack a home would have to be transferred somewhere else, though he did not know where.

After one of the most violent days of Israel's nearly three-week-old war against the Hamas movement in Gaza, the conflict appeared late Thursday to be moving toward a diplomatic solution.

Just before midnight, Foreign Minister Tzipi Livni unexpectedly flew to Washington, where she and U.S. Secretary of State Condoleezza Rice were expected to sign an agreement on measures intended to stop Hamas from smuggling weapons into the Gaza Strip from Egypt, a critical Israeli demand. Meanwhile, Israeli officials said they were hopeful that an Egyptian-brokered cease-fire with Hamas was within reach.

Israel's two other top leaders, Prime Minister Ehud Olmert and Defense Minister Ehud Barak, met Thursday night, discussing terms to which Hamas had agreed in principle on Wednesday. Although there were no announcements after the meeting and the talks still had the potential to sour, officials said the gap between Israel and Hamas had narrowed considerably. Israel's top negotiator, Defense Ministry official Amos Gilad, was scheduled to return to Cairo on Friday for more talks.

The two sides are discussing a one-year renewable truce, said a senior Israeli official, declining to be identified by name because of the sensitivity of the talks. The agreement would specify how quickly Israel would withdraw its forces from Gaza and when it would reopen border crossings, the official said. Israel has demanded guarantees that the rocket fire from Gaza will stop.

Fighting continued amid the diplomatic activity. In past wars, Israel has intensified its military campaign in the final days and hours before a cease-fire in order to achieve favorable truce terms.

Dozens of Palestinians died Thursday, bringing the toll to more than 1,090, according to Palestinian health officials. A Gazan Health Ministry official, Muawiyah Hassanein, said 375 children, 150 women and 14 medical staffers were among the dead. He said 5,000 people had been injured. Thirteen Israelis have been killed, including three civilians.

As Israeli troops backed by helicopter gunships pushed into densely populated Gaza City, a U.N. compound and a hospital building were shelled and a Hamas leader was killed.

At the U.N. compound, an Israeli shell ignited a warehouse filled with food and injured three people. U.N. Secretary General Ban Ki-moon -- in Israel to push for the cease-fire -- said Barak had initially apologized for the incident, calling it a "grave mistake." But Olmert, while expressing regret, later said a Hamas fighter had used the building to take cover after firing at Israeli troops.

U.N. Relief and Works Agency spokesman Christopher Gunness vehemently denied that charge, saying it was another in a series of incidents in recent weeks in which Israel has made excuses for striking U.N. facilities and personnel. "Their credibility is hanging in rags," he said.

Gunness also accused Israel of hitting the U.N. compound with white phosphorus, a weapon that under international law is not supposed to be used in urban areas because it is highly flammable. Israel has not commented on its possible use of white phosphorus but has insisted it is in compliance with international law. White phosphorus is permitted for use in illumination and in creating smoke screens.

Separately, an artillery shell hit a hospital's administrative building. The building caught fire, trapping workers inside, hospital officials said. An Israel Defense Forces spokesman said the military was investigating.

"For two hours the fire was burning, with heavy smoke," said Ziad Kahlut, a doctor at al-Quds Hospital. "We were panicked that the fire would spread to the rest of the hospital."

Although that did not happen, Kahlut said conditions at the hospital were grim. "Our hospital is now overcrowded with the sick, the wounded, staff and some 300 civilians, many of them women and children, who are taking shelter," he said. "I do not know how long this can last."

Also on Thursday, a senior Hamas leader, Interior Minister Said Siam, was killed when an Israeli airstrike flattened his brother's home in the Jabalya refugee camp, according to an Israeli military statement later confirmed by Hamas. Siam was one of Hamas's top five leaders within Gaza, with leadership over a 13,000-member police and security force, and was considered a hard-liner who resisted compromise with Israel. Siam's brother and other Hamas members were also killed.

Siam is the highest-ranking Hamas political leader to die in the 20-day Israeli campaign; the others are believed to have gone into hiding.

Hamas and its allies in Gaza fired more than 25 rockets into Israel on Thursday. There were no immediate reports of injuries.

Thursday's urban combat forced anxious residents to flee their homes, while others reported being trapped, too terrified to move. The skyline was obscured by black smoke rising from several high-rises in the heart of Gaza City that had been struck by artillery shells, as well as by smoke screens being dropped from helicopters.

Witnesses said Israeli soldiers were moving through the southwestern neighborhood of Tel Hawwa. "For 12 hours we were under continuous bombing, from 1 a.m. to 1 p.m.," said Fathi Sabah, a journalist working for the London-based Arabic-language newspaper al-Hayat.

At one point, he said, his building was struck and a fire broke out. Firefighters were unable to get through. "We had to try to extinguish the fire with the few pots of drinking water we have," said Sabah, who endured the shelling with his two daughters, Rima, 12, and Jumana, 11 . "We were just waiting to die. It was hell."

Among other buildings hit Thursday was a high-rise used by journalists. Two cameramen were injured.

At a news conference in Tel Aviv, Ban said that civilian suffering in Gaza had become "unbearable" and that the territory was facing "a dire humanitarian crisis."

Livni defended the military offensive, saying Israel is "doing what it needs to do to defend its citizens."

Hamas and its allies have fired thousands of rockets into Israel in the past eight years. The pace accelerated after the Islamist movement, which won Palestinian elections in 2006, routed forces loyal to the rival Fatah party in June 2007 and seized control of the narrow coastal strip. Since then, Israel has implemented a crushing economic blockade and carried out regular military raids that it has said were a response to rocket fire.

Hamas's 1988 charter calls for Israel's destruction, but current leaders say they are willing to enter into a long-term truce with the Jewish state.

Israel has not allowed foreign journalists into Gaza to operate independently since it launched its offensive Dec. 27. On Thursday, a small group of journalists was allowed to travel into Gaza with the Israeli military.

In an interview, an Israeli sergeant, 20-year-old Almog, told the reporters that Hamas's resistance had been less than expected. "They are villagers with guns. They don't even aim when they shoot," said Almog, a gunner on an armored personnel carrier who was not allowed to give his last name. "We kept saying Hamas was a strong terror organization, but it was more easy than we thought it would be."

Israel's leaders debated Monday how and when to bring their 17-day-old offensive in Gaza to an end, as battles continued to rage on the edge of Gaza City and as Israeli reservists flowed into the territory, ready for a possible deeper push into urban areas.

The moves came as negotiators in Cairo sought to reach a cease-fire agreement, hoping to put a halt to violence that medical officials in the Gaza Strip said has claimed the lives of more than 900 Palestinians, as many as half of them civilians. Thirteen Israelis have been killed, three of them civilians.

Speaking after a meeting with Egyptian President Hosni Mubarak, special Middle East envoy Tony Blair said that "the elements of an agreement" for a cease-fire were in place. But Israeli officials with knowledge of the talks said significant obstacles remained.

Hamas representatives were also in Cairo on Monday, conferring with Egyptian officials including intelligence chief Omar Suleiman. An Israeli Defense Ministry official, Amos Gilad, was negotiating with the Egyptians by phone Monday and was expected to travel to Cairo later in the week.

The talks in Egypt center on the question of how to keep Hamas from smuggling weapons across the Egypt-Gaza border. A senior Israeli official said Israel and Egypt are in basic agreement on a plan that would allow the European Union and the West Bank-based Palestinian Authority to share responsibility for monitoring the border and the crossing point at Rafah.

"We think the Egyptian position is very reasonable," the senior Israeli official said. Egypt has said that it is reluctant to have any international monitoring presence on its borders.

But the Israeli official said the Islamist Hamas movement is adamantly opposed to any deal that would permit the Palestinian Authority, which is led by the secular Fatah party, to return to Gaza. Hamas, which won 2006 Palestinian legislative elections, routed Fatah forces in June 2007 and has had control of Gaza ever since.

Hamas leader Ismail Haniyeh, speaking from an undisclosed location on the movement's television station, attempted Monday to rally supporters. "As we are in the middle of this crisis, we tell our people we, God willing, are closer to victory. All the blood that is being shed will not be in vain," Haniyeh said, while also acknowledging that the group is pursuing diplomacy. Hamas leaders in Gaza could not be reached for comment because they have gone into hiding.

If the negotiations in Cairo are successful, they could preempt an Israeli push into the strip's densely packed cities and refugee camps, where Hamas leaders are believed to have taken refuge. Israeli military officials allege that Hamas politicians are riding out the war in a bunker beneath Gaza City's main medical center, Shifa Hospital, in addition to other sites.

Any broadening of the Israeli operation would also be likely to include an effort to retake the area around the Egyptian border, known to Israelis as the Philadelphi corridor, military analysts say.

Israel pulled its troops and settlers out of Gaza in 2005 but continued to carry out raids in the coastal territory as Hamas and its allies used the strip to launch rockets at Israel. A six-month cease-fire expired in mid-December, followed by a barrage of rocket launches aimed at southern Israel. Israel began its military offensive with a surprise attack on Dec. 27.

On Monday, Israel carried out more than 60 airstrikes, continuing to bomb tunnels along the border, as well as homes of Hamas leaders. There was intense fighting reported around Gaza City as Israel tightened its cordon on Gaza's largest population center, home to 400,000 of Gaza's 1.5 million residents.

Officials and analysts say Israel's top three political leaders disagree over how the remainder of the war should play out. Prime Minister Ehud Olmert is said to favor an expansion, while Foreign Minister Tzipi Livni and Defense Minister Ehud Barak are believed to be more hesitant. Barak has aggressively pushed the talks in Egypt; Livni has said that Israel can soon declare victory and withdraw. The three run the country together and must achieve consensus before Israel can act.

Olmert spokesman Mark Regev acknowledged that Barak, Livni and Olmert don't always see eye-to-eye, but said they have agreed on the war's aims. "It's probably a very good thing that we don't have group-think at the top levels of the Israeli government," he said.

In an interview with Israel Radio on Monday, Livni said Israel had succeeded in proving to Hamas it is serious about deterrence.

"Israel is a country that reacts vigorously when its citizens are fired upon, which is a good thing," she said. "That is something that Hamas now understands, and that is how we are going to react in the future if they so much as dare fire one missile at Israel." Israel and the United States consider Hamas a terrorist organization.

Gabriel Sheffer, a political scientist at Hebrew University, said politics may play a role in the differing opinions among the three. In elections slated for Feb. 10, both Barak and Livni are hoping to succeed Olmert, who is stepping down under an ethics cloud. "If the number of Israeli casualties goes up, the effect on Barak and Livni will be very bad," he said. "Olmert has nothing to lose."

Sheffer said U.S. politics may also be a factor: Israel probably does not want to be fighting a war when President-elect Barack Obama is inaugurated next week, he said.

As international pressure to end the war has mounted, Obama has largely stayed out of the debate over whether Israel should be allowed to continue its offensive, while President Bush has staunchly backed the Jewish state. In his final news conference as president, Bush again asserted Israel's "right to defend herself" and called on Hamas to stop its rocket fire.

"There will not be a sustainable cease-fire if they continue firing rockets," he said. "I happen to believe the choice is Hamas's to make."

Hamas and its allies continued to fire rockets into southern Israel on Monday, launching more than 20. There were no reports of major injuries, and the number was significantly down from earlier in the war, when Hamas was launching 40 per day or more.

"The organization has lost much of its willingness to fight," said Shlomo Dror, spokesman for Israel's Defense Ministry. "It's much less than we anticipated."

Military analysts, however, have warned that Hamas could be saving its ammunition, with plans to launch urban warfare if Israeli troops push into Gaza's cities and camps.

Ahmed Qassim, a 30-year-old insurance salesman, said Hamas fighters had moved into densely populated parts of Gaza City in recent days and were using residential neighborhoods as bases for firing rockets. But he blamed Israel for the civilian casualties that result when the military strikes at those fighters. "The Israelis are so powerful and they have so much technology," he said. "They should be able to tell the difference between the resistance and civilians."

The Israeli military has not allowed foreign journalists into Gaza to work independently. But the military on Monday permitted a small group of reporters to travel with troops into the strip. A Reuters journalist reported from the outskirts of Gaza City that soldiers said they were meeting little resistance, but that they were pushing into urban centers to try to draw Palestinian fire.

"We are tightening the encirclement of the city," Brig. Eyal Eisenberg said, according to Reuters. "We are not static. We are careful to be constantly on the move."