The West Bank is tense after extremist settlers torch a mosque in the occupied territories. The Christian Science Monitor reports that the Israeli government claims that enforcing the settlement moratorium requires ignoring existing court orders to dismantle unauthorized settlements. Israel's cabinet has adopted a "national priority" map ensuring more funds for some settlements. As Hamas celebrates its 22nd anniversary, Fatah says Palestinian reconciliation talks are stalemated. Reports suggest that Pres. Abbas has written to PM Netanyahu urging him to finalize a prisoner exchange, but that Iranian Pres. Ahmadinejad has told Hamas leaders to take their time. A report suggests that Israeli opposition leader Tzipi Livni canceled a visit to the UK for fear of arrest over the Gaza war. Army-funded rabbis continue to urge soldiers to disobey orders. An Israeli town refuses to allow a Palestinian to build on his own land. Netanyahu will reportedly take a direct role in deciding future demolitions of Palestinian homes in occupied East Jerusalem. The Independent recalls the Gaza war one year on.

The New York Times blog investigates how Israel is attempting to use YouTube for propaganda purposes. A commentary in the Christian Science Monitor says Pres. Obama 's Nobel Prize does not sit well with Arabs or Palestinians because of the impasse in peace talks. Extremist West Bank settlers allegedly set fire to a mosque. Palestinian Christians call the occupation a "sin." An Israeli Cabinet minister predicts a settler population could grow by as much as 10,000 in the coming year. Israeli negotiations with the Vatican fail to change church policies. The EU calls the Palestinian police the cornerstone of a future state. The Jerusalem Post argues the US is scaling back Middle East diplomacy because of disappointment on peace talks. In the context of statehood, the PA is reportedly planning to resurrect the Palestinian pound. Reports continue that Egypt is building a wall along and underneath its border with Gaza, but the Egyptian government strongly denies this, and an editorial in the National says Israel and not Egypt is responsible for the humanitarian crisis in Gaza. Israel's ambassador to the US calls J Street a "unique problem."

Israel arrests a leader of nonviolent opposition to the settlement barrier in the occupied West Bank, and disrupts the farewell ceremony for UNRWA's outgoing chief. Swedish officials say the EU resolution on Jerusalem is very close to their original proposal. Israeli military officials say Palestinians are trying to coerce Israel into accepting Palestinian statehood. More Israelis approve of Pres. Obama, but still do not feel that he supports Israel. The BBC looks at divisions between Fatah and Hamas in Nablus. Jailed Fatah leader Marwan Barghouti is profiled by the Independent. PM Salam Fayyad says Palestinians will not issue a unilateral Declaration of Independence. Gideon Levy says Israel is a "semi-theocracy." Michael Jansen says the Arabs should take advantage of the recent EU declaration on Jerusalem, and the Swedish ambassador to Jordan reaffirms European concerns about human rights in the occupied territories. Israeli FM Lieberman expresses sympathy with extremist settlers. In Bitter Lemons, Ghassan Khatib says Israeli pressure must be resisted, and Daniel Seidemann says the EU resolution is neither revolutionary nor trivial.

The New York Times says Israelis are united around the release of captured soldier Galid Shalit. Hamas sources say the swap is now up to Israel, and still may include jailed Fatah leader Marwan Barghouti. The EU has adopted a motion saying Jerusalem should be shared rather than divided, and the US says it is an issue for negotiations. Israel's Ambassador to the US Michael Oren defends his government's settlement moratorium policy in the Wall Street Journal, but Peace Now says building in the occupied territories is continuing briskly. Meanwhile, Palestinians are being prevented from building in "Area C." Extremist Israeli settlers threaten violence against Palestinians in response to the moratorium and a commentary in Ha'aretz complains that Israeli policy has made all Israelis into settlers. PM Netanyahu claims Palestinians have made a strategic decision to delay talks. A PA police officer has been sentenced to death for collaboration with Israel. The Guardian highlights health risks to Gaza children from contaminated water and a Huffington Post commentary describes nonviolent resistance to the occupation and the separation barrier in the West Bank town of Qalqilya.

The LA Times runs an obituary of Edward Sanders, Middle East adviser to Pres. Carter. Speculation continues to swirl around a possible prisoner exchange between Israel and Hamas, and the possible inclusion of jailed Fatah leader Marwan Barghouti. The German mediator has asked Hamas to stop press leaks. Israel is reportedly planning to build a wall along the Egypt-Gaza border, and is banning foreign leaders from visiting the Strip. Israel's justice minister has come under heavy criticism for saying that Jewish religious law should be paramount in Israel. Ha'aretz runs a commentary questioning whether Israel is interested in peace, and another arguing that the settlers' own extremism will prove their undoing. A commentary in the Guardian points out how much American financial support underwrites settler extremism. The head of UNRWA says the plight of the refugees must be addressed. The Tablet website profiles PM Fayyad.

The Washington Post says the PA government state building plan could provide the key to peace, the Arab News points out that no one has any better ideas, and the World Bank is donating $64 million toward the effort. Israel closes the only oil and gas terminal on the Gaza border. AFP profiles the plight of Palestinian refugees in Lebanon. Egypt says Israel is stalling on a prisoner exchange with Hamas, and may offer a new plan for Palestinian reconciliation. Jordan's Foreign Minister confirms his country's interest in the creation of a Palestinian state. Israel is ignoring 400 Palestinian home demolition appeals. A commentary in Ha'aretz says the settlement moratorium is part of a "masquerade," and the paper also interviews an extremist Jewish settler. Israeli diplomats are preparing to combat a Swedish EU initiative to recognize occupied East Jerusalem as the Palestinian capital. The Media Line profiles the new Palestinian "planned" city in the West Bank, and some Zionists around the world express outrage at the Jewish National Fund decision to donate 3,000 trees to the project. Ir Amim explains the dangers of new settlement construction in occupied East Jerusalem. The Daily Star reviews Joe Sacco's new graphic novel "Footnotes in Gaza."

Extremist settlers continued to defy the building moratorium, and the Israeli military fears they may attack Palestinians. A confidential EU report accuses Israel of de facto annexation of occupied East Jerusalem. Martin Indyk suggests that ensuring Palestinian control over West Bank territories is essential. Israelis are divided on the prospect of a prisoner swap with Hamas, and the two sides have both rejected mediator's proposals. A militant group claims to have attacked Israeli occupation forces in Gaza, which is suffering under a fuel and power crisis. The UAE is donating $2.5 million to UNRWA after the agency announced a zero balance. Ziad AbuZayyad says PM Netanyahu has to prove he is interested in peace. Ha'aretz says that while Hamas is imposing strict religious social order in Gaza, it is also cracking down on violent extremist groups. Pres. Obama, like all his predecessors, declines to move the US embassy in Israel to Jerusalem. A bitter argument has erupted over the appointment of Israel's UN ambassador. Patrick Seale agrees with other recent Arab commentaries that the Palestinians should call Netanyahu's bluff and return to negotiations with a strong stance. The Jordan Times denounces as strategically foolish Hamas' declaration that the 1947 UN partition resolution is null and void.

Israeli police began arresting settlers resisting the building moratorium, and their leaders reject PM Netanyahu's plea to respect the order. Defense Minister Barak says settlers can continue to authorize minor construction projects. Middle East Progress interviews Special Envoy George Mitchell. The world financial crisis is spurring new Jewish immigration to Israel. The EU is likely reject a Swedish proposal to recognize occupied East Jerusalem as the Palestinian capital. A Kuwaiti newspaper says captured Israeli soldier Gilad Shalit has been moved to a secret location in Cairo in preparation for prisoner swap. Israeli occupation forces raid the West Bank village of Jenin. YNet argues that Netanyahu cannot reverse course on the settlement moratorium. The Jerusalem Post looks at international moves to boycott Israel and Israeli military efforts to use new social media for propaganda purposes. A commentary in the Guardian says Israel's abuse of Bedouins in the Negev desert shatters the myth that Israeli democracy. Michael Young argues that critics of Pres. Abbas make little sense. The Jordan Times calls Israel's stripping of Jerusalem residency from Palestinians ethnic cleansing, and Daoud Kuttab says the future of peace talks will be determined in the next few weeks.

Clashes occur in occupied East Jerusalem as Jewish settlers continue to evict Palestinian families, and a new report finds that Israel canceled Jerusalem residency for thousands of Palestinians in 2008. The EU has proposed recognizing East Jerusalem as the Palestinian capital and strengthening Palestinian institutions in the occupied city. Bethlehem shopkeepers are hoping for a more prosperous Christmas. Israel's consul general to the Pacific Northwest says his country wants peace. Israeli settlers continue to vow to defy the building moratorium and scuffle with building inspectors and Palestinians. Public building in the West Bank has dropped 60% since Netanyahu took office. Speculation continues about the potential inclusion of jailed Fatah leader Marwan Barghouti in a possible Israel-Hamas prisoner exchange, with the possibility that he also may be exiled. Hamas says one of its fighters has been killed. Foreign Policy magazine has included PM Salam Fayyad in its list of 100 leading global thinkers. David Makovsky argues that both Netanyahu and Abbas need to be strengthened in order for peace to proceed. The JTA profiles the "Islamic Movement" organization among Palestinian citizens of Israel.

The New York Times says the Obama administration needs a more imaginative approach to peacemaking. After settlers vow to defy the construction moratorium, and describe Pres. Obama as "the enemy of the Jews," Israel hires more building inspectors. The Christian Science Monitor interviews Hamas official Aziz Dweik. UN Secretary-General Ban Ki-moon stresses the importance of creating a Palestinian state. German mediators are reportedly attempting to finalize a prisoner exchange between Israel and Hamas, but Mossad has recommended that Fatah leader Marwan Barghouti not be included. Quartet envoy Tony Blair says without a two state agreement there will be a "hell of a fight." YNet urges Netanyahu to take responsibility for Minister Limor Livnat's description of the Obama administration as "awful." The National profiles employment difficulties facing Palestinian women in Israel. Al-Hayat compares the difficulties faced by El-Baradei and Mitchell dealing with Netanyahu and Ahmadinejad. Rami Khouri says the Palestinians should call Israel's bluff and returned to negotiations with an aggressive agenda. Yossi Alpher argues that the PA government state building plan provides hope in the West Bank, but a different approach is required for Gaza.