NEWS: Pres. Abbas and PM Fayyad send mixed messages on UN bid. The US threatens to halt aid to Gaza. Pres. Abbas says NATO may have a future role in a Palestinian state. The PA is formulating policies to offset future financial crises. Israel prepares for possible Palestinian statehood rallies in September. Israel may freeze defense spending because of cost of living protests. The US urges Israel not to proceed with planed settlement expansions in occupied East Jerusalem. The EU says the plan threatens a two-state solution. PM Fayyad says the move shows “total disregard for Palestinian rights.” Abbas stresses there can be no settlements in a Palestinian state. Israel is accused of systematically denying education to Palestinian prisoners. COMMENTARY: Amos Oz says Israel's middle-class protest movement shows the spirit of the country. Ha'aretz says Israeli leaders are becoming hysterical about September. Israeli Amb. Michael Oren says Israel will not agree to international peacekeepers in a Palestinian state. Joseph Dana says Israeli “social justice” protests are ignoring the occupation. JJ Goldberg looks at the lawsuit on the status of Jerusalem in US passports. The Arab News says the time has come for Palestinians to go to the UN and demand independence. David Newman says the West Bank separation barrier is actually a de facto border between Israel and Palestine. Sharif Omar says the wall has not changed the strategic equation between Israel and the Palestinians. Hussein Ibish looks at the Palestinian financial crisis and its political implications.

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