Business has more than doubled in recent months, said sweet shop owner Magdi Abu Salha, taking a break from slicing up knefi, the sticky cheese-based dessert for which his home town of Nablus is famed.

Two years ago the northern West Bank town was a stronghold of armed Palestinian militant groups.

And just three months ago, the six Israeli roadblocks and checkpoints that had ringed it for nine years had all but killed its economic life.

Magdi Abu Salha, Nablus sweet shop owner
Magdi Abu Salha says the Israeli-Arab visitors have boosted business

Most residents could leave only by two routes - on foot or through checkpoints which often had long queues.

Israel says its system of closures and checkpoints in the West Bank is necessary to stop potential suicide bombers and other attackers, but many Palestinians have long viewed it as a form of collective punishment.

International efforts to boost the Palestinian Authority security forces have already borne fruit in Jenin, which saw movement restrictions eased last year.

And in recent weeks, Israel has deemed security gains sufficient for it to take what it describes as the "calculated risk" of removing and easing many key roadblocks and checkpoints across the West Bank.

West Bank map

Checkpoints lifted: Nablus journeys

Cars now drive within a few minutes through Hawarra, Nablus's main checkpoint; the other roads in and out of the city have reopened.

Headscarved women pick through piles of shoes and bags as Arabic pop plays from loudspeakers on the newly bustling streets.

A cinema opened its doors in the city last month for the first time in 20 years.

Dozens of busloads of Israeli-Arabs have been coming to shop on Saturdays since April, when Israel began allowing them to cross the West Bank barrier from northern Israel, one day a week.

Political graffiti and posters of militants that have died are being replaced with signs saying "Welcome to Nablus, the economic capital". Palestinian policemen are enforcing new seat belt laws.

'Change is possible'

In a complex perched on a rubble-strewn hill outside the town centre, Tony Blair, Middle East envoy for the international community and former British PM, toured the gleaming tiled floors of the Nablus Hyatt this week.

"We didn't bring the swimming trunks," he quipped by the new hotel's large, pristine pool.

Middle East quartet envoy Tony Blair
Mr Blair believes "credible" peace talks will soon be launched

Tasked with improving the economic situation in the West Bank, he has pushed hard for the removal of the checkpoints.

"Two years ago, I couldn't have come here, there were militia in the streets," he said.

"There's still massive amount to do, but providing we keep building on the security and the economics, and then we add to that a credible political negotiation, what Nablus shows is that change is possible."

Suleiman Daifi, a member of the hotel's board, says the $3.1m that a group of local figures ploughed into the facility was a "very dangerous investment".

The complex opened in April and is not yet covering its costs. But the management say the removal of the checkpoints and Israeli-Arab visitors have boosted business 20-30%.

Nablus Hyatt board member Suleiman Daifi
The Nablus Hyatt was a "dangerous" investment, says Mr Daifi

Israel's new, right-leaning prime minister, Benjamin Netanyahu, has made much of the phrase "economic peace".

In opposition, he used it to refer to plans to boost economic activity in the West Bank as he did not consider the Palestinians, split between the Fatah-dominated Palestinian Authority and Hamas, ready for serious negotiations to end the decades-old conflict.

Netanyahu wants to concentrate on the economic situation - as if all Arabs become rich they will forget the political issue… that's wrong
Essam al-Qudu
Businessman

Since coming to office, and under pressure from US President Barack Obama to kick-start peace talks, he has advocated political negotiations alongside economic measures.

But while he reluctantly backed the principle of a demilitarised Palestinian state, he has issued the new demand that the Palestinians recognise Israel as a Jewish state, and refuses to freeze all settlement activity.

Mr Daifi said he believes the peace process is "stuck".

"I think economic peace is a joke," he said. "The economy will not be sustainable if there is not a sustainable political situation."

Mr Blair said he believes American efforts will lead to the relaunch of a "credible" peace process "in the next few weeks, next few months".

'Root of the problem'

On Wednesday, the IMF issued an unusually upbeat economic forecast for the West Bank, predicting 7% growth - but only if Israel continues to ease restrictions.

But Essam al-Qudu, who has to travel all over the West Bank as manager of a company which installs security systems, said there is no guarantee the checkpoints will even stay open.

He says there is already a "different atmosphere" in Nablus.

But he remembers the short-lived wave of optimism and freedom of movement in the wake of the 1993 Oslo peace accords, which gave way to heavy closures as the second Palestinian intifada or uprising broke out in 2000.

"Netanyahu wants to concentrate on the economic situation - as if all Arabs become rich they will forget the political issue… that's wrong."

"The main root of the problem is the political situation - an independent state for us," he said.