Fallout from the US abandonment of a settlement freeze continues: Palestinians say talks are not possible if construction continues; some analysts think the move hurts chances for peace; others say a deal will be slow and difficult; Israeli and Palestinian negotiators criticize US policy; the US says it does not and will not condone settlement activity; Daoud Kuttab says the US should now use sticks as well as carrots; Ziad Asali says giving up is not an option. Jackson Diehl says the US can either support Palestinian state-building or present its own plan. Special Envoy Mitchell will continue with talks. Bribery is rampant in the occupied territories. Israel launches air strikes against Gaza. UNSG Ban says Israel should end settlement activity. Edwin Bennatan says Israeli policies have created a Palestinian state. Israel offers compensation for flotilla deaths. Asharq Al-Awsat interviews Mohammed Dahlan. Rami Khouri says dissolving the PA is a terrible idea. Ghassan Khatib says the current situation is undermining the Palestinian leadership. Yossi Alpher says UN creation of a Palestinian state could be a good idea.