GENEVA -- Three of every four Palestinians live in poverty and their economy still depends on donors, despite 4.5 percent economic growth last year, the United Nations said on Wednesday.

The rise was fueled largely by agriculture and small businesses, which engage in ``forced import substitution'' because so few goods can get past Israel's tough blockade, said Raja Khalidi, a senior official at the U.N. Conference on Trade and Development.

But the increase in Gross Domestic Product follows two years of ``freefall'' since the outbreak of Israeli-Palestinian fighting in late 2000 and is unlikely to be sustained, Khalidi said.

``The fact that there was growth in 2003 is really a matter of bottoming out, not a rebound,'' he said, as he launched UNCTAD's annual report on the economic consequences of the conflict. ``Treading water is perhaps an apt metaphor,'' Khalidi later told the AP.

The Palestinian economy has been hit by Israeli roadblocks and closures, which have hampered commerce in the West Bank and Gaza Strip.

Israel says the restrictions are needed to stop Palestinian suicide bombers and gunmen who have killed around a thousand Israelis. Around 3,000 Palestinians have died.

The World Bank has cited a 40 percent fall in Palestinian per capita GDP since the outbreak of violence, saying it far exceeds the impact of the Great Depression in the United States.

``The Palestinian economy is being transformed into one of subsistence,'' said Khalidi.

Average income among the 3.5 million Palestinians fell from $1,750 a year in 1999 to $1,040 last year. Overall, 72 percent of Palestinians live below a poverty line of $3.60 a day.

Some 127,000 Palestinians used to work in Israel, providing vital income for many families. But under security restrictions the number has slumped to 53,000.

Around 277,000 Palestinians are unemployed, from a 792,000-strong work force, according to U.N. figures. The figure would be worse but for the Palestinian economy's ability to absorb many workers who used to have jobs in Israel, albeit at far lower wages, the report said.

Palestinian areas also rely on international aid to keep the economy afloat, Khalidi said. ``It's a crutch, and without that crutch (growth) is not sustainable,'' he said.

DUBAI (Reuters) - Secretary of State Colin Powell said on Wednesday that Palestinians should end a four-year-old revolt because it was spreading terrorism and hindering the creation of an independent Palestinian state. "It is time to end the uprising. We want a Palestinian state. The (U.S.) president wants the establishment of a Palestinian state for the Palestinian people which exists side by side with Israel," Powell told Arab satellite television Al Jazeera. His comments were translated into Arabic.

"This will only happen when terrorism ends. But the uprising has helped spread terrorism and has not accomplished anything during these years except adding to the deterioration of the Palestinian economic situation and the deterioration of living standards in general among Palestinians," he said.

Violence has spiralled on the heels of the fourth anniversary of the Palestinian revolt, which broke out following the visit of then Israeli opposition leader, now Prime Minister Ariel Sharon, to a sensitive Jerusalem holy site on Sept. 28, 2000.

"The uprising has prevented us from achieving progress in several peace plans," Powell said.

Last year, the Quartet of Middle East peace mediators -- the United States, Russia, the European Union and the United Nations -- adopted the so-called "road map" peace plan calling for mutual steps toward an interim Palestinian state in 2005.

Ministers of the group said after a meeting last Wednesday that no significant progress has been made in implementing it.

With new upscale restaurants, bars, and theater, the West Bank city is undergoing a cultural revival.

Just a few minutes drive from Yasser Arafat's half-destroyed headquarters, Usama Khalaf's version of upscale Ramallah dining is taking off.

His restaurant called Darna occupies a grand renovated stone villa with high-ceilinged archways and a second-floor patio that draws scores of young Palestinians. It serves large dishes of innovative Middle Eastern fare, but, more importantly, offers fragments of normalcy, which has become so elusive during the past four years.

The $800,000 spent by the restaurateur to open Darna - where waiters sport snappy bow ties and tuxedo vests - represents more than a shrewd bid to attract the city's bourgeois; it signals a revival of the cultural scene that made Ramallah a cosmopolitan capital for Palestinians.

In recent months new eateries have opened and the city's offerings have expanded despite Israel checkpoints and military raids. For Khalaf, opening Darna was simultaneously the fulfillment of a life's dream and an act of political defiance.

"I had an obligation to my hometown," Khalaf says. "When they saw someone investing despite the closures and incursions, it gave people the willingness to stay."

In the 1950s under Jordanian rule, Arab vacationers would arrive in Ramallah from the Persian Gulf in the summer to savor the cool mountain breeze during the evening. Pleasant weather and pastoral surroundings earned the tiny city the nickname "the Bride of Palestine." When the West Bank came under Israeli control, the Arab citizens of Israel would overrun the city's hotels on the weekends. It boasted a thriving nightlife, which included the only jazz club in the West Bank.

Danny Jafar, the grandson of a Ramallah hotelier, opened the Sangrias restaurant during the first year of the fighting with just five tables and a menu featuring nachos and burritos.

During the four months of daily military curfews in the summer of 2002, word of mouth spread that Sangrias had remained open for journalists. Patrons desperate to break the monotony of the citywide lockdown surreptitiously found their way to the bar. "I used to open up when people would go home and the tanks would come out," Jafar says. "Lights would be off and curtains would be drawn, but there were people inside. It was a hangout."

Last month, Jafar opened a new lounge area out back and expanded Sangrias' capacity to 45 tables. On a recent Saturday night, recordings by American rapper 50 Cent played from a stereo in the courtyard and smoke from nargilla water pipes floated among diners under illuminated walnut trees.

"I could be at a funeral procession in the morning and I could be at a bar at night," said Sameh Katkhuda, an information technology consultant. "This isn't Ramallah. It's San Francisco."

Unlike other cities in the West Bank, Ramallah is a base for the Palestinian government, nonprofit organizations, and foreign diplomats, providing for a steady flow of disposable income. The international presence in the city of 21,000 (the population goes up to 250,000 if you count surrounding villages) has helped turn it into hub for cultural institutions. The Ramallah Cultural Palace, a state-of-the art auditorium that opened in July, has already hosted a film festival and a production of "Al-Fawanees," the first Palestinian musical.

"As an outsider, you would think that there's no place for cultural activities or a cultural life," says Rita Janssen, a UN official who is the director of the cultural palace. "But it seems to be more important to them than when you're living in peace and quiet."

Hours after a performance of "Al-Fawanees," both Ms. Janssen and casts members were dining at Darna, where 20-somethings wearing American athletic jerseys had gathered to lounge in the patio.

When the restaurant was featured on Israeli television news magazine, Ariel Sharon is said to have been "amazed" at the site of such an establishment, owner Khalaf recalled with satisfaction.

"We're not just suicide bombers. We don't love just blood," Khalaf said. "We have another face. Ultimately, we have a desire to live."

Israel's recent withdrawal from the Gaza strip has given rise to fierce ideological debate among the followers of religious Zionism.

Some religious Zionists, such as members of Gush Emunim (Bloc of the Faithful), a politico-religious movement established in 1974, view the withdrawal from Gaza as a direct challenge to their religious convictions and theological doctrines.

They believed the evacuation of some 8000 Jewish settlers from the Gaza Strip was an unforgivable act of treachery and blasphemy on the part of the Israeli government, especially Prime Minister Ariel Sharon.

Followers of the Gush Emunim ideology upheld for generations that the settlement of Jews throughout the "Biblical Land of Israel", including "Judea and Samaria" (the Biblical names of the West Bank), was a religious duty ordained by God.

Since then, the movement spearheaded the settlement drive in the West Bank and Gaza Strip, benefiting from large sums of money made available by successive Israeli governments and wealthy Jewish donors, especially in North America.

Other Zionist groups, including the younger generations of religious youth, who were told by rabbis like Avraham Shapira, that God would intervene at the last moment and foil the withdrawal, are now facing a traumatic period of self-analysis.

Shapira is Head of Mercaz Harav, a Talmudical college, in west Jerusalem.

The withdrawal so challenged Zionist ideals that settler rabbis and community leaders like Zvi Hendel compared the evacuation of the Gaza Settlers to the Holocaust.

Trauma

According to Girshon Baskin, a co-founder of a Palestinian-Israeli peace centre, many messianic settlers see the withdrawal from Gaza as an "invalidation of their religious beliefs".

He predicted that many settlers would be demoralised, while others might commit suicide. By the second week of the withdrawal, two settlers - a man and a woman - had separately set themselves on fire and died in protest.

On 11 September, Radio Israel also reported that a soldier had apparently killed himself in the Gush Katif settlement. Israeli media said the soldier was distraught over the withdrawal from the settlement.

"I remember that when (former Israeli Prime Minister Yitzhak) Rabin sought to vacate them from Hebron after the mosque massacre in 1994, he was advised by an expert that they would commit mass suicide like Masada, and that made Rabin change his mind."

In 73 CE, about 1000 Jewish rebels and their families who had rebelled against the authority of Rome committed suicide rather than surrender to the Roman army.

Asked what he thought the settlers would do to make up for their "losses" in Gaza, Baskin said they would likely seek to provoke and attack the Palestinians.

"They will lick their wounds and try to put up a determined stance to prevent any further withdrawal in the West Bank.

But some religious Zionist leaders and activists deny they are facing a crisis of faith.

"There is indeed a trauma, the disengagement was very painful. But we are a people who have not succumbed to inquisitions, pogroms, expulsions, and holocausts, so we will not succumb to this," said a settler leader named Ash.

He told Aljazeera.net that he was convinced that the religious Zionist movement would emerge stronger than before.

Historical mistake

David Ha'ivri, an activist in the Revava ultra-religious grassroots organisation, told Aljazeera.net that the fundamental goals of religious Zionism, namely the creation of a religious Jewish state that would lead to the redemption of the Jewish people, remained unchanged despite the Israeli withdrawal from Gaza.

However, Ha'ivri recognised that religious Zionism made a historical mistake by allying itself with secular Zionism.

"I think we as religious Zionists made a historical mistake by entering into an alliance with secular Zionism from the very inception.

"I am not saying that secular Zionism has not done anything worthwhile; I am saying that they have finished their mission."

Ha'ivri said the Israeli withdrawal from Gaza was not the only issue behind the evolving showdown with the secular state.

"We are not against the state merely because of the uprooting of Jews from Gaza. This state and its supreme court are hostile to everything Jewish, they allow the sale of non-kosher food and show no respect for the sanctity of the Shabath (Sabbath)."

More Jewish, less Zionist

Alexander Yakobson, Professor of History at the Hebrew University, believes that some "fringe elements" of religious and messianic Zionists might eventually try to assassinate Israeli Prime Minister Ariel Sharon.

"They could do one of three things, either assassinate Sharon, or attack the Dome of the Rock, or commit some dramatic bloodshed against the Palestinians."

Yakobson believes many religious Zionists will ultimately move away from the "secular establishment," including the Likud party, and move closer to the Haredi, (also known as Charedi) non-Zionist orthodox community who believe their religious practices originated with the divine revelation of the Torah to Moses on Mount Sinai.

This view is supported by veteran religious Zionist leader Yohanan Ben Yaccov who was quoted in a Ha'aretz article on 27 August, as saying that "on the axis between Jewishness and Israeliness, we have to turn more in the Jewish direction, to conduct a dialogue with the Haredi community, even at the expense of the dialogue with the liberal-democratic elite."

However, it is unlikely that the Haredi community will give an unconditional welcome to disenchanted religious Zionists.

"The disengagement shows how much the religious Zionists were mistaken. For ages, these people worshiped a secular state which is not based n Jewish and Torah ideals. This is their mistake, and I hope they will learn their lesson," said Ben Moshe, a Haredi activist from West Jerusalem.

"[At] the end of the day, the disengagement proves that Judaism and Zionism are incompatible. One can't be a true Jew and Zionist at the same time," he told Aljazeera.net.

Alienation

Ya'er Sheleg, an Israeli journalist sympathetic with the settler movement, believes the withdrawal from Gaza will have an effect on the emotional state of religious Zionist youths.

"It can be assumed that they will head toward passive alienation, a reduction in the spirit of volunteerism in favour of assimilation by means of the domestic couch potato culture."

However, Sheleg believes that in order to survive and compete for the hearts and minds of the Israeli public, religious Zionists, would have to adopt a more rational and non-mythical analysis of reality.

Israeli troops have shot dead a Palestinian fighter at the Erez border crossing between the Gaza Strip and Israel.

Israel said the Palestinian was killed on Wednesday in a fire fight that erupted after a group of resistance fighters infiltrated the Israeli part of the Erez terminal.

"One of the terrorists threw an explosive device and fired towards the soldiers who killed him," an Israeli military source said.

He added that at least three Palestinian policemen had also been injured during the incident. He could not say how the Palestinian fighters managed to enter the terminal.

Palestinian security sources confirmed the death and said Israeli troops had arrested all Palestinian police officials at the terminal.

The Islamic Jihad group and al-Aqsa Martyrs Brigades said in a statement that they jointly carried out the attack.

Grisly killings

The killing came just hours after Israeli occupation forces killed eight Palestinians, including six children, on Tuesday.

Artillery shells fired by Israeli tanks on a northern Gaza farm killed seven, including the children, while an eighth Palestinian was killed in southeast Gaza.

Medical sources at the Kamal Adwan hospital in Bait Lahya in northern Gaza told Aljazeera.net that the six child victims were from one family.

The killings brought angry condemnation from Mahmud Abbas - front-runner in the race for Palestinian president to be held on Sunday - who called Israel "the Zionist enemy".

"This will not bring peace for anyone. If such aggression continues we will not be able to engage in a peace process," he said.

He later tried to visit the wounded in a Bait Lahya hospital but drove away without getting out of his car because of tank bursts nearby after a rocket volley by resistance fighters into Israel.

Israel's domestic security service has warned that Jewish hardliners might attack Islamic targets to derail the planned withdrawal from the Gaza Strip.

Shin Beth chief Avi Dichter on Tuesday told the foreign affairs and defence committee of the Israeli parliament that hardliners might also open fire on security forces during the planned evacuation of the Gaza Strip's 8000 settlers.

"Right-wing extremists have not given up on the idea of attacking Jerusalem's Haram al-Sharif - Islam’s third holiest site," Dichter said.

Asked by a committee member why the Shin Beth had made no arrests, he said agents did "not have sufficient proof".

Dichter said he did not expect the number of those involved in armed resistance to the enforced pullout to exceed a few dozen.

Sinister plan

Military intelligence chief General Aaron Farkash gave a similar warning in October of a new attempt to blow up the Haram al-Sharif as the Gaza pullout neared.

In the early 1980s, Jewish hardliners attempted to blow up the revered shrine in a bid to derail Israel's withdrawal from the Sinai peninsula under the Camp David peace accord with Egypt, but the plan was foiled by the Shin Beth.

The Haram al-Sharif encompasses the Dome of the Rock and al-Aqsa mosque.

Israeli tanks have killed at least eight Palestinians in Bait Lahya in the Gaza Strip, medics and security sources say.

Tuesday's deadly attack on two houses also injured several and came after mortar fire from Palestinian resistance fighters wounded two people in a nearby Jewish settlement.

Israeli settlements built on occupied Palestinian lands are deemed illegal under international law.

Palestinian witnesses said Israeli tanks fired into Bait Lahya shortly after the mortars crashed into the Nissanit settlement.

Israeli sources said they had fired at a group of nine masked Palestinians who were seen with rocket launchers.

A number of the victims were children although their identities were not immediately known, said Mahmud al-Assali, director of the Kamal Edwane hospital, where most of the wounded were sent.

Israeli medics in Nissanit said the mortar bombs landed near a bus filled with children, lightly injuring two adults escorting them.

The Israeli occupation army had no immediate comment.

Toll keeps rising

The violence erupted just one day after Israel said it had ended an armoured incursion into Bait Hanun and Jabalya in northern Gaza in what Tel Aviv said was another effort to eliminate rocket and mortar squads who target the illegal settlements.

But witnesses said Israeli troops had not withdrawn completely.

On Monday, Israeli forces killed a 22-year-old Palestinian said to have been a member of the Izz al-Din al-Qassam Brigades and seriously injured a Palestinian girl in al-Shabura refugee camp in Rafah.

About 20 Palestinians have been killed since Israeli forces began the latest military operations in the area last week.

The latest deaths brought the overall toll since the September 2000 start of the intifada to 3624 Palestinians and 970 Israelis.