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.”

Israel is offering new salary bonuses to high school educators based on criteria including their success in motivating pupils to perform their army service, fueling criticism of alleged militarism in its education system.

The decision to give such ''differential rewards'' to school staff was first reported by the Haaretz newspaper late last year, and was confirmed this week to the Monitor by the education ministry. Critics say the move, and other recent steps, could inculcate a hawkish worldview among Israeli youth and thereby make future Middle East peacemaking even more difficult. But defenders of the step say keeping draft rates high is essential for Israel's security in a dangerous regional environment.

An education ministry circular, dated Oct. 21, 2012, and sent to principals, outlines a new policy of giving bonuses as of the close of the current school year. The extra payments to teachers are to be determined according to "achievements in learning," "social achievements," and "achievements in values" by schools. Schools giving places to special education students and their having a ''high rate of enlistment for military,national or civil service'' are the values achievements for which teachers are to be rewarded, according to the circular, which was obtained by the Monitor

Israeli high schools have always been influenced by the military, for which service is compulsory for Israeli Jewish men and women outside the growing ultra-orthodox population, which enjoys de facto exemptions. But the connection has become more pronounced since 2009, when Gideon Saar, from Prime Minister Benjamin Netanyahu's Likud party, took over as education minister.

Army officials say the percentage of the Israeli population performing the mandatory service has dropped slightly in recent years and that this represents a concern in long-range planning.

'Path of Values'

The linkage between bonuses and draft rates comes just months after the ministry expanded a program it runs jointly with the army whose official purpose is ''to strengthen the ties between schools and the army.'' Now running in hundreds of schools, the Derech Erech ("Path of Values") program brings army officers to schools to discuss the relationship between the army and society and to strengthen teenagers' desire to make a substantial contribution during their three years of mandatory military service.

The army also runs another long-standing program, Gadna, which gives high schoolers a taste of life in the military. Addressing teachers at a session of the Derech Erech program in Jerusalem, last summer, Mr. Saar told them ''teachers are lifelong draftees,'' according to media reports at the time.

According to the circular, full-time teachers in schools whose achievements are ranked as being in the top 10 percent in their category will receive bonuses of 8,000 shekels ($2,160), while 6,000 shekels ($1,620) will be paid for the next 10 percent, 4,000 shekels ($1,081) for the following, and then 3,000 ($810) shekels for being in the top 40 percent of the schools.

Unabashed assertion of Israeli claims to biblically resonant sites in the occupied West Bank is also part of the ministry's current approach. Two years ago, Saar inaugurated a controversial program to bring high schoolers on trips to the Cave of the Patriarchs holy site and the hard-line Jewish settlement in the West Bank city of Hebron.

Education or indoctrination?

Critics say the stress on the army and territory comes at the expense of humanistic values.

"The ministry of education is taking Israel in a more militaristic, more nationalistic, more xenophobic, and more chauvinistic direction. It's not an education, it's a sort of indoctrination," says former education minister and former leader of the dovish Meretz party Yossi Sarid.

"We are not Sparta, we are not raising people to become soldiers," he says. "Unfortunately, sooner or later they become soldiers, but this should be a necessity, not an idea."

Asked whether the policies would make it harder for Israel to make peace with its Arab neighbors in the long run, Mr. Sarid responds, ''I believe that is the target. It's not an inevitable result, it's the aim of the system at the present moment. The aim is to make people more ultra-nationalist and ultra-rightist.''

Israeli Arab high schools – whose pupils do not go on to serve in the military – will pay a high price for heightened army involvement in the schools and the new funding scheme, says Sharaf Hassan, educational director for the Association for Civil Rights in Israel.

''Educating to prepare for the army and to encourage enlistment comes at the expense of regular education, which is meant to educate for democracy and citizenship,'' he says.

Ministry response

The education ministry said in a written response to the criticism of the Hebron trips that they ''are part of a program that deals with the topic of heritage and does not have any political aspects.'' The ministry said it was important for pupils to visit the Cave of the Patriarchs – where according to tradition the bible's Abraham, Isaac, and Jacob are buried – because ''this constitutes the cradle of the Jewish nation.''

Asked to respond to criticism of the new bonus system, the ministry said it is ''designed to develop excellence among teachers and pupils. The ministry is aware of the great investment and commitment needed to bring pupils to high achievements in the values, social, and learning fields.''

Raanan Gissin, who served as spokesman for former Prime Minister Ariel Sharon, dismissed the criticism of the funding decision, saying ensuring a high draft rate is essential for Israel.

''Israel finds itself in a peculiar situation, surrounded by enemies and threats including from Iran and from terrorism, whether conventional or non-conventional," he says. "So serving for three years is sine qua non of the way society survives in this environment. To survive, everyone has to take part in defense and that means three years of military service.''

Mr. Gissin also said it is a positive that army officers come to the high schools. ''They are not speaking politics there, they are speaking as people with experience carrying the burden. They are saying there is another way to fulfill yourself other than becoming a tycoon, that you can do it by serving your country.''

Few Israelis today remember that until 1966, Arab citizens of the Jewish state were under army rule and needed permits from the local military governor to travel outside their home towns for work, study, or medical care. Even fewer know that a key figure in bringing an end to this less than democratic system was Menachem Begin, the fiery founder of the right-wing opposition Herut party, predecessor of today's Likud party headed by Prime Minister Benjamin Netanyahu.

"Begin was an extreme nationalist and he was also a real democrat and liberal," recalls Uri Avnery, a peace activist who was a left-wing member of the Knesset during the 1960s. "He really believed in full equality for Arab citizens. The communists, Begin, and people like me all cooperated inside the Knesset and outside to have this system abolished."

Mr. Begin, former head of the pre-state Irgun underground that fought British rule, and prime minister from 1977 to 1983, is remembered at the state-funded heritage center in Jerusalem that bears his name as a scrupulous democrat in domestic affairs, upholding the rule of law, minority rights, and the right to criticize.

"I recommend that we not be content with just the independence of the law but that we raise the banner of the supremacy of the law," an exhibit quotes Begin as saying. Nearby is a black-and-white picture of Arabs at a session of the High Court of Justice. In its legacy section, the exhibit gives as much space to Begin's stress on "human freedom," including "freedom from the dictatorship of the majority," as it does to his well-known project of building settlements throughout the West Bank, which he referred to by its biblical names, Judea and Samaria.

But the liberal aspects of Begin's legacy are now, according to many observers, being discarded. In the run-up to Israel's Jan. 22 elections, in which Netanyahu is expected to easily win reelection, a new generation of Likud leaders unabashedly seeks to move the party and the country further to the right on the Palestinian issue and on domestic matters.

Though the party's rising stars deny the charge, some critics argue that the new Likud threatens Israeli democracy.

"'This young country is still a very fragile democracy," says Ofer Kenig, a scholar at the Israel Democracy Institute, an independent think tank whose stated goal is to bolster Israeli democracy. "If the governing party doesn't stand to protect and strengthen the democratic values, then we have things to worry about."

The new Likud platform

Mr. Kenig cited young Likud legislators' efforts in the outgoing Knesset to limit foreign funding for nongovernmental organizations, a move seen as aimed at silencing criticism of groups that monitor West Bank occupation practices. Kenig also takes issue with their ambitions to limit the power of the Supreme Court, and, in his view, to infringe on freedom of expression and the standing of the Arab minority.

Four architects of that controversial legislative drive – Danny Danon, Zeev Elkin, Yariv Levine, and Tzipi Hotovely – surged to prominent slots in Likud's November primaries and have emerged as key voices during the campaign. Meanwhile, three ministers who were older stalwarts of Begin's liberal approach, including the Likud founder's son Benny, and Dan Meridor, moderate son of another Irgun leader, appear unlikely to hold influential positions in the next parliament.

The primary also saw the rise to 15th on the Likud party list of candidates of Moshe Feiglin, a Jewish fundamentalist who calls for rebuilding the biblical temple in Jerusalem and has campaigned on a proposal to pay Arab families half a million dollars each to emigrate from the West Bank.

And moving the party even further to the right was a merger of lists with Yisrael Beiteinu, whose leader, Avigdor Lieberman, calls for the ouster of Palestinian President Mahmoud Abbas. Yisrael Beiteinu stoked anti-Arab racism during the 2009 election campaign with its slogan "Only Lieberman understands Arabic," hinting he would get tough with the Arab minority.

Mr. Danon, who soared from 24 to six within the Likud in the primaries, has not espoused Mr.Feiglin's initiative for a voluntary removal of Arabs but he does make clear in remarks to the Monitor his view that the international community should forget about a two-state solution to the conflict, to which Netanyahu gave qualified endorsement in 2009.

Danon believes that Israel should annex the Jewish settlements along with open land in the West Bank, leaving the Palestinians with scraps. "I believe that the ones who need to be in blocs are the Palestinians and not the settlers in Judea and Samaria," he says.

The thesis of Danon's recently published book (in English) The Will to Prevail is that Israel should stop being afraid of foreign objections to its policies. "We have to do what is good for us and to ignore foreign pressures," he says.

In domestic matters, Danon has advocated that members of Israel's Arab minority be required to pledge loyalty to Israel as a Jewish and democratic state before they are granted driver's licenses or identity cards, a stance inspired by Yisrael Beiteinu, which campaigned in 2009 on a proposal that people who do not take such a loyalty oath should lose their citizenship.

In his comments to the Monitor, Danon sharply criticized the Israeli Supreme Court for a decision last week reinstating the electoral candidacy of Haneen Zoabi, a legislator from the Arab nationalist Balad party. Danon was among those who led the successful campaign to have the Central Elections Committee cancel Ms. Zoabi's candidacy on the grounds that she violated Israeli law by participating in a pro-Palestinian flotilla in 2009 to protest Israel's blockade of the Gaza Strip. Even though the judges showed rare unanimity in ruling 9-0 to overturn the ban, Danon accuses the court of "ignoring the language of the law and deciding on norms that are against what has been legislated." He is vowing to advance a bill in the new Knesset to bar Zoabi from serving if she is reelected.

Battling to be most 'right'

Danon denies that Likud is deviating from Begin's legacy. "One of the big changes is generational change, and this is something welcome. Just as in Britain and the US, younger leaders were chosen for more senior positions, so too in Israel, a young generation, active, and with ideology, worked hard and got the backing of the public. I am very proud of today's Likud. The way I was elected was very democratic, more than other parties."

As the campaign nears a close, analysts say a surge in opinion polls by Likud's rival for right-wing religious voters, the smaller Jewish Home party, is contributing to extremism as the two seek to outbid each other in their nationalism. Like Danon, Jewish Home leader Naftali Bennett is calling for Israel to annex most of the West Bank, not including densely populated Arab areas.

Zalman Shoval, former Israeli ambassador to the US, says that Netanyahu wants to limit the clout of Danon and his allies and will be able to do so in the short term. "The composition of the list is a fact that cannot be disputed," he says. "But Netanyahu is a pragmatic centrist and he will look for coalition partners to try to balance things."

However, Avnery, the former legislator, does not believe Netanyahu will prove a restraining influence. "Israel will become more of what it is, more right wing, antipeace, and less democratic," he says.

Of today's Likud, Avnery says, "Begin would have looked upon it with abomination."

While Palestinians prepare for an upgrade to non-member state status at the UN late this month, small businesses in the occupied West Bank are sliding towards the abyss due to a fiscal crisis that economists say threatens the very existence of the Palestinian Authority.

As a result of a dramatic drop off in foreign donor funding, the authority has been failing to pay on time in recent months its 170,000 employees, whose salaries directly support about a quarter of the West Bank and Gaza Strip population. And sometimes, as happened when October salaries were finally disbursed Sunday, the PA makes only partial salary payments.

Economic hardship in the Palestinian areas, where growth is subject to the vagaries of the ongoing conflict with Israel and the vicissitudes of Israeli strictures on movement of people and goods, is nothing new. But now the PA salaries, which previously formed the safety net, have become uncertain and economists warn the shortfalls could stoke social instability.

''The salaries are the most important single factor deciding the level of poverty.They are like a monthly blood transfusion to our economic body,'' explains Hisham Awartani, an economist at An-Najah University in Nablus.

The outlook for PA wages in the coming months appears stormy at best. The PA faces a $260 million financing shortfall, a lot more than its monthly wage bill, according to the World Bank. With uncertainty about when and how much employees will be paid rippling through the economy, Palestinian economists, joined by the World Bank, fear social unrest, citing a week long outbreak of protests in September over the rising cost of living and a hike in fuel prices. The demonstrations forced the government to roll back the price increase.

And the already grave situation will become a lot worse if Israel, in retaliation for the UN move, suspends transfers of VAT and customs revenues it collects on behalf of the PA. Israeli foreign ministry spokesman Yigal Palmor says this is under consideration.

Woes felt on the street

The ripple effect of salary non-payment, combined with a slowdown in economic growth, is evident across the West Bank, including at Ali Bodie's butchery shop on the road from Bethlehem to Hebron.

''The salaries problem impacts me 100 percent,'' says Mr. Bodie, who wears a white skullcap and offers his visitor a watery cup of coffee ''There's a great drop in the number of customers, and people who do buy, buy half a chicken instead of a whole one,'' he says.

At a furniture store across the street, owner Khader Jadallah says PA employees are failing to meet their monthly installment payments.

''I'm thinking of closing,'' he says in his empty showroom. ''People aren't buying furniture, it's finished.'' A few stores away, mechanic Ali Abdul-Qadr Sidr says the salary disruptions are even causing people to delay changing their oil. ''I tell people they need an oil change but they say I can't, I have no money. So they delay for a month. They will destroy their cars by not changing the oil.''

The PA is trying to keep up business as usual but there is deep concern. In his offices in al-Bireh, near Ramallah, Palestinian Monetary Authority governor Jihad al-Wazir fine tunes the banking system in a bid to keep unrest from surging. On Sunday, after the finance ministry announced it would pay employees up to 2000 shekels as a salary installment, he signed a circular to banks preventing them from taking all that amount as debt on mortgage payments workers owe the banks.

''I am signing that a bank can only deduct 35 percent of this salary installment for mortgage payment,'' he told the Monitor in an interview as his aide waited for the document. ''Otherwise people won't have money left over for their daily expenses and my expectation is that if that happens, there will be demonstrations in the streets."

Foreign help not coming

Al-Wazir, the US-educated son of Yasser Arafat's deputy Khalial al-Wazir, who was assassinated by Israeli commandos in Tunis in 1988, says the current crisis is the most serious the economy has faced since the launch of self-rule in 1994.

''In the past there were avenues to compensate for the deficits and these avenues have been depleted. I am referring to the avenues of borrowing from the banking system and taking from donors here and there.In the past when the Arabs wouldn't pay, the Europeans did and when the Europeans didn't pay the Arabs or Americans did. But now all iterations in the matrix have been tried and all of them are depleted.''

Foreign donations have dropped from $1.978 billion in 2008 to $983 million in 2011, with Arab, EU and US contributions all falling, according to the World Bank. The US had pledged $200 million for 2012 but the money has not materialized, the bank says.

The World Bank said in a report published in September that the way to ease the crisis is for donors to increase their funding as a short term solution and for Israel to lift strictures on the Palestinian economy, which it says are needed for security reasons. These would include allowing the development of the majority of the West Bank that is under full Israeli control known as area C, so as to boost the private sector. The Bank also says the PA needs to continue with reforms that will cut spending, including civil service reform.

According to the World Bank, the tax transfers account for 70 percent of revenues for the PA. Witholding them will mean that ''the Palestinian Authority definitely cannot continue and that there is an Israeli economic war against the PA,'' according to Samir Abdallah, director of the Ramallah-based Palestinian Economic Policy Research Institute.

Mr. Palmor, the Israeli foreign ministry spokesman, counters that the Palestinian UN upgrade marks a sharp turn away from the path of bilateral negotiations. ''If they breach blatantly the whole framework of the Israeli-Palestinian relationship than there is no way back and Israel will do whatever it sees fit. He who burns bridges should not complain about not being able to get to the other side,'' Palmor says.

In Ramallah, Amjad Rizeq, who employs two workers for his door installing business, says that he has not been able to pay them their salaries during the last three months. ''The workers in the authority get only part of their salary and they want to use it for food not doors. The whole economy is bad. Hopefully there will be an improvement and I can pay them. What can we do?''

Awartani, the an-Najah university economist, asks: ''Can the authority survive the crisis? It's an open question. If you know the answer tell me.''

A rare gesture of empathy for victims of the Holocaust has underscored how divided Palestinians are over recognizing what Jews consider the darkest chapter in their history – and also how far apart Israelis and Palestinians remain, not only when it comes to the present conflict, but also the past.

Ziyad Bandak, Palestinian Authority President Mahmoud Abbas's adviser on Christian affairs, visited the Auschwitz concentration camp in Poland last month, laying a wreath in memory of the more than 1 million people, most of them Jews, who were killed there during the Holocaust. Mr. Bandak, who was invited by a Polish group working for tolerance, was flayed in public statements by the Islamic militant group Hamas movement for harming the Palestinian cause and marketing a ''false Zionist alleged tragedy.''

But Bandak is being backed up by moderate Palestinian leaders in the West Bank for what they say is a ''human" act.

In the past, there was a sense among Palestinians that recognition of the Holocaust would detract from their own cause and suffering – an opinion accentuated by the feeling that their own struggles, including displacement by Israel's establishment in 1948 and the ongoing military occupation, have gone unrecognized by Israel and the international community.

With his adviser's visit to Auschwitz, Mr. Abbas has come full circle on the issue. In 1984, he published a book based on his doctoral thesis alleging that the Holocaust was exaggerated and that Zionists created ''the myth'' that 6 million Jews were murdered. But when he became Palestinian Authority prime minister in 2003, Abbas wrote that the Holocaust was an unforgivable crime against the Jewish nation and humanity. He said that he wrote the book when the Palestinians were at war with Israel and would not have made such remarks today.

''There is a competition over victimhood and suffering,'' says Hanan Ashrawi, the Ramallah-based spokeswoman for the Palestinian Liberation Organization. ''Many people feel 'Why should we recognize their suffering if they are still inflicting pain on us? We are not responsible for what happened to them. We are the victims and yet we are being blamed.' The feeling is 'Let them stop victimizing us now because their suffering in Europe is not something we're responsible for – but what's happening to us, the Israeli occupation is responsible for.'''

But Ms. Ashrawi herself says she supports Bandak's act, calling it a "human" gesture.

"You can never discount suffering and empathy with the suffering of the other, regardless of whether he is Jewish, Christian, Muslim, or atheist. The Holocaust is a horrible chapter in human history. It should never be repeated, and should never happen to anybody, and an expression of empathy and recognition of the horror is only human,'' she says.

Qais Abdul-Karim, a Palestinian legislator from the left-wing Badil party, termed the wreath laying ''a normal thing to do."

"I do not believe it will divert attention from the rights and agony of the Palestinian people. We do not deny the Holocaust or agree to any position that will try to minimize or justify the cruelty and barbarism embodied in the Holocaust," he says.

Bandak himself was traveling abroad and unavailable for comment.

In the eyes of Hamas, however, his visit was a kind of sacrilege. In remarks quoted by Reuters, spokesman Fawzi Barhoum termed the Holocaust ''an alleged tragedy'' and said the visit came ''at the expense of the true Palestinian tragedy.'' BBC reports that an editorial in Hamas's Filastin newspaper asked, ''What is the wisdom in such a simple step that supports the Jews and their crimes? Neither the Jews nor we believe that Hitler killed six million Jews.''

Salah Bardawil, another Hamas leader, stopped short of Holocaust denial, but vehemently criticized Bandak and accused him of giving cover to Israeli behavior that Bardawil compares to that of the Nazis.

''A great number of Jews and Europeans were killed by the Nazis, but this cannot be exploited for Israel's interests while Israel commits the same crimes against the Palestinian people that were committed against European peoples at that time. This visit is wrong and unacceptable to the Palestinian people," Mr. Bardawil says.

Two years ago, some Hamas figures criticized efforts by the United Nations Relief and Works Agency (UNRWA), which administers Palestinian refugee camps across the region, to include lessons about the Holocaust in the schools in runs in Gaza. The program still has not been implemented, and an UNWRA spokesman declined to comment on it. Without referring specifically to the UNRWA plans, Bardawil says he is against teaching about the Holocaust in Palestinian schools.

''He who wants to study the human crimes in general must include all the crimes, including the expulsion of Palestinians from their lands in 1948, the siege of Gaza, the war on Gaza, and the many crimes in the region. Focusing on the crimes of the Nazis of killing Jews is political, and Israel will try to benefit from this," he says.

Bandak's act comes two months after Salah Abdel-Shafi, the PLO envoy to Berlin, called the Holocaust ''the worst crime in human history'' while speaking to Israeli journalists. In an interview with the Monitor this week, Mr. Abdel-Shafi reiterated that statement.

But, in a formulation that angered Israeli officials who were contacted after the interview, he defined the Holocaust as including non-Jewish victims of the Nazis, such as the Russians who died in the German invasion of the Soviet Union.

''This is a crime against humanity at large. Not only were Jews the victims of the Holocaust but also Germans, Russians, people of different political affiliations, social democrats, communists, homosexuals. The magnitude of the crime, and its being against anything that had to do with humanity and progress, makes it into the worst crime in history,'' Abdel-Shafi says.

Yigal Palmor, the Israeli foreign ministry spokesman, says Abdel-Shafi's statement shows that despite Bandak's gesture, the Palestinians ''haven't made a step forward toward reconciliation. We haven't made any progress at all.''

''Without denying the tragedy of all the people who died, the Holocaust is a term specifically used for the systematic massacre of Jews and it is also used for the systematic massacre of Gypsies. But it is not used by anyone to describe the plight of other peoples," Mr. Palmor says.

However, Yehuda Bauer, one of the country's foremost Holocaust scholars and an academic adviser to Israeli Holocaust research center and museum Yad Vashem, termed Bandak's visit to Auschwitz ''significant.''

''The more leaders of the Palestinian national movement realize the background of the Jewish people, the better it is. In the very long run this could help create a climate for reconciliation'' Mr. Bauer says.