The PLO says Israeli extremists and settlement construction should not be allowed to derail talks. The next round of negotiations will be split between Jerusalem and Egypt. Chief PLO negotiator Saeb Erekat denies apologizing to Israelis. Celebrating the new year, Israelis are pessimistic about peace. A new report says Palestinian security reform is threatened by the occupation and internal divisions. PLO officials say they won't recognize Israel as a “Jewish state.” Sec. Clinton says momentum is building in the Arab world in support of a two state agreement, and that there may never be another chance for peace. Ha'aretz interviews David Makovsky. Hamas accuses the PA of “protecting the enemy” and “treason” for arresting suspects in recent shooting attacks. The Jerusalem Post says PM Netanyahu is embracing new language to facilitate negotiations. The BBC looks at Hamas' presence in the West Bank. Sanctions against the UC Irvine MSU, for disrupting a talk by Israeli Amb. Michael Oren, are shortened. Randa Takieddine considers Europe's absence from the peace process. Social media are becoming a Middle East battlefield. The CSM reviews a new humor book about Middle East peace.

Israeli and Palestinian leaders express optimism after the resumption of direct talks. Drive-by shooting attacks show Hamas is still able to operate in the West Bank. Daoud Kuttab says Palestinian independence is inevitable. Palestinian leaders angrily reject Iranian criticism of negotiations, and have asked the US to intervene on the settlement issue. Todd Gitlin and Liel Leibovitz say both sides must acknowledge each other's attachment to the land. The CSM says Palestinian and Israeli leaders must work together to block extremists. Palestinian officials say they are trying to reach a peace agreement and Israeli officials say one is possible within a year. FM Lieberman pushes for new settlement construction. Shaul Arieli says settlement construction hurts Israel. Egypt says $50 billion will be needed to pay for Middle East peace. Bradley Burston says religious extremists are enemies of humanity. The IMF says loosened Israeli restrictions have prompted Palestinian economic growth. Avi Shlaim says American intervention in negotiations is critical. The US temporarily restricts diplomats from traveling in the West Bank. Israeli authorities are accused of discriminating against Arabs in Jerusalem. Adel Al Toraifi says Palestinian state building is of paramount importance. Hussein Ibish looks at arguments for including Hamas in negotiations and its likely consequences.