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.

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