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News reports today are dominated by speculation about a potential prisoner exchange between Israel and Hamas involving captured Israeli soldier Gilad Shalit, and Ha'aretz examines who the winners and losers would be in the event of an agreement. Fox news interviews PM Fayyad. IPS reports that Palestinian children in the occupied territories face daily attacks from Israeli settlers. Two Hamas fighters are killed in an explosion in Gaza, and Yasser Abed Rabbo says Hamas would form a pact with the devil to weaken the PLO. Pres. Abbas says there will be no third intifada. A Palestinian student in Israel appears to have been rejected from university program because of his ethnicity. The BBC profiles life in divided and occupied Jerusalem. Gershon Baskin considers the merits of the PA government state building plan. In Bitter Lemons, Yossi Alpher and Ghassan Khatib debate how to move forward given the present impasse. In the New York Times blog, Daniel Gordis, Daoud Kuttab and David Makovsky debate the prospect of a Hamas-Israel prisoner exchange.
The Washington Post profiles the first planned Palestinian city in the West Bank. The PLO Central Committee is scheduled to meet next month and is expected to approve the continuation of Pres. Abbas and PM Fayyad in office. Exchanges of fire between Hamas and Israel threaten the continuation of the de facto truce. An Israeli expert predicts that at least 130 countries would recognize a unilaterally declared Palestinian state, and Fayyad reiterates he will not accept a "fragmented" state. Right wing Israeli MKs plan to commemorate the death of extremist Rabbi Meir Kahane. Pres. Peres says Netanyahu can and must make an agreement with the Palestinians. Sever Plocker says that Israelis seem completely unaware of the crisis of international legitimacy they are suffering. The Jerusalem Post says the PA State building plan would be unstoppable. There is widespread speculation about a prisoner exchange between Israel and Hamas, but Tariq Alhomayed says Hamas has absolutely no ideas about how to govern. Hussein Agha and Robert Malley critique all existing proposals for dealing with the Israeli-Palestinian conflict in the New York Review of Books.
Palestinians complain Israel is diverting water to settlers in the occupied territories. Jailed Fatah leader Marwan Barghouti calls for popular and diplomatic action to combat the occupation, and some others are speaking openly about the prospect of a third intifada. Reuters examines the state of the peace process. The Sydney Morning Herald says Jerusalem is the key to peace, and a Palestinian MK warns that Israel is planning 15,000 new settlement units in the occupied city. The US expresses concern over Israel's arrest of five Palestinian intelligence officers. Palestine is allocated a postal code by the Universal Postal Union. Pres. Abbas says Israel is conducting secret talks with Hamas about a possible temporary Palestinian state. Ynet argues that Israel does not face a demographic "threat" from Palestinians. PM Netanyahu says that despite growing doubts about his intentions, he wants a final status agreement. Pro-settler soldiers in the Israeli military threaten mutiny.
The New York Times points out that Pres. Abbas' consideration of resignation constitutes a crisis for potential peace talks. Some Jewish Americans are making a coordinated effort to buy property in the occupied Palestinian territories. David Ignatius says the PA State building plan is the best hope for a better future, and the Christian Science Monitor argues that unilateralism on either side in the Middle East is implausible. Israeli warplanes reportedly attack Gaza. Former PA Prime Minister Ahmed Qurei adds his voice to those expressing doubt about the future of a two state negotiated peace agreement. Ha'aretz says the prospect of a Palestinian declaration of statehood should rejuvenate the Israeli peace camp, and wonders if PM Netanyahu's intransigence is pushing Washington to embrace Palestinian positions, a concern also voiced in a Ynet editorial. The Jerusalem Post has competing editorials condemning and praising the emerging strategy of Pres. Abbas. Pres. Obama says Israel's ongoing settlement expansion could be "dangerous."
Israeli government plans to add 900 new settler housing units in occupied East Jerusalem draws ire from the US government, the UN, Europeans, Palestinians and Arabs. Israeli bulldozers demolish two Palestinian apartments in the city. A group of Jewish Americans is on a mission to buy property in Jerusalem and other parts of the occupied territories. A commentary in Ha'aretz suggests that PM Netanyahu senses US weakness on Jerusalem, but another suggests that he has a personal and political interest in advancing peace. A new poll finds 75% of Jewish Israelis support negotiations with the PA. In Cairo, Pres. Abbas reaffirms a commitment to seek UN recognition of Palestinian statehood, and an editorial in the Arab News argues that if both Israel and Hamas are against the idea, it must have some merit. Rami Khouri argues that the world is tiring of the Palestinian question, and Daoud Kuttab says that Palestinians have no choice left other than unilateral action. Shai Feldman and Khalil Shikaki propose guiding principles for further US engagement in Israeli-Palestinian peace making.

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