Mr Olmert's admission comes less than a week after the incoming US secretary of defence, Robert Gates, speculating at a Senate confirmation hearing on Iran's possible motives for trying to build nuclear arms, suggested that Israel had the bomb.

Speaking in Berlin after a meeting yesterday with Germany's chancellor, Angela Merkel, Mr Olmert attempted to backtrack. He insisted that Israel's doggedly held position of nuclear weapons ambiguity had not changed.

"Israel has said many times - and I also said this to German television in an interview - that we will not be the first country that introduces nuclear weapons to the Middle East," Mr Olmert insisted. He added: "That was our position, that is our position - nothing has changed."

But his remarks did nothing to assuage criticism in Israel. Opposition leaders accused him of "irresponsible" bungling and said he should resign.

"This causes great harm to Israel. We are in the midst of a huge [diplomatic] onslaught against Iran's attempts to make a nuclear bomb," former foreign minister Silvan Shalom, a member of the rightwing Likud party, said on Army Radio. He added: "We always face the same question which our enemies ask: 'Why is Israel allowed to [have a bomb] and not Iran?'"

Yossi Beilin, of the leftwing Meretz party, which is also in opposition, questioned Mr Olmert's fitness to lead. "The prime minister's amazing statement regarding nuclear capability indicates a lack of caution bordering on irresponsibility," the Yedioth Ahronoth newspaper quoted him as saying.

Mr Olmert's domestic approval ratings have plummeted since this summer's war against Lebanon's Hizbullah guerrillas.

Aides to the prime minister tried frantically to limit the damage. His spokeswoman, Miri Eisin, who is accompanying Mr Olmert on his visit to Germany and Italy, said it did not mean Israel possessed or wanted to acquire nuclear weapons. "No, he wasn't saying anything like that."

Israel has long declined to confirm or deny having the bomb as part of a "strategic ambiguity" policy that it says fends off numerically superior Arab enemies. But Arabs and Iran see a double standard in US policy in the region.

By not declaring itself to be nuclear-armed, Israel gets round a US ban on funding countries that proliferate weapons of mass destruction. It can thus enjoy more than $2bn (£1.02bn) a year in military and other aid from Washington.

Israel's main atomic reactor, officially for civilian use, became operational in the early 1960s. The CIA first concluded that Israel had begun to produce nuclear weapons in 1968, but few details emerged until 1986 when Mordechai Vanunu, a former technician at the nuclear facility, gave the Sunday Times detailed descriptions that led defence analysts to rank the country as the sixth largest nuclear power.

Mr Vanunu, who was released in 2004 after spending 18 years in prison, welcomed the prime minister's admission. "Obviously, I don't welcome the atomic bomb but this openness could lead at last to some realpolitik - and maybe to some real peace." Mr Vanunu said he believed the admission was not accidental. "My idea is that it was said intentionally. For 20 years they tried to deny me and my story but the policy of cheating and lying didn't succeed. There is now a new defence secretary in the United States and there are also changes taking place in the Arab world, so I think that may have led to the change."

"It's important for me that you emphasise the three principles of the Quartet, that they are not negotiable, that they are the basis for everything. Please say this," Olmert tells Prodi, leaning close to the Italian leader.

Olmert also asks Prodi to mention Israel's status as a Jewish state, implying that he rules out a key Palestinian demand that millions of Palestinian refugees and their descendants be allowed into Israel, changing its demographic balance and possibly making Jews a minority.

"I have heard you say something about the Jewish state," Olmert prompts Prodi.

At the press conference, Prodi obliged. "Every peace process must go through a renouncing of violence, recognition of the state of Israel, recognition of past agreements and, I must add, also the recognition of Israel as a Jewish state," Prodi said.

As it happened, Prodi did deliver words to that effect. He further endorsed Israel's vision of remaining a Jewish state -- code for ruling out an influx of Palestinian refugees. This, Channel 10 television suggested, was also at Olmert's prodding.

"You said something about a Jewish state (in the past). I know that," Olmert is shown telling Prodi as the two confer in what looks like a lounge in an Italian government complex.

While allies coordinating their rhetoric is nothing new in international diplomacy, the unvarnished glimpse into Olmert's back-room lobbying may prove a fresh embarrassment at home.

Before Rome, Olmert was in Berlin. That visit was marked by Israeli furor at a German television interview in which he seemed to confirm, in a reversal of a decades-old secrecy policy, that Israel has the Middle East's only nuclear weapons.

The internal tension in Gaza continued as Israeli troops shot dead a Palestinian for the first time since a fragile ceasefire was agreed 17 days ago. The Israeli military said the man was armed and carrying grenades near the border fence north of Karni.

The killing of the Hamas man in the Gaza town of Khan Younis came two days after the murder of three young sons of an intelligence colonel in the Fatah-dominated security forces. In a faxed statement, Hamas accused a Fatah "death squad" of killing Bassam Al Farah, 32, described as the director of family counselling at the southern Gaza sharia courts. A Fatah official accused Hamas of pre-empting an investigation. Witnesses told Associated Press that four gunmen had waited for Mr Farah outside the courthouse, forced him to his knees and shot him.

Mr Haniyeh criticised President Mahmoud Abbas's deployment of security forces in Gaza, saying his Fatah faction should accept Hamas's election victory last January.

Despite veiled warnings of revenge from one Hamas spokesman, Mr Haniyeh, a Hamas political leader as well as Prime Minister, told reporters in Khartoum: "We want to assure you that words such as 'civil war' don't exist in our dictionary."

The fatal shooting by the Israeli troops was followed by what Palestinian sources described as an incident in which two Palestinians aboard a Gaza fishing boat were wounded by Israeli gunfire.

Earlier, the Israeli Prime Minister, Ehud Olmert, said that the ceasefire was becoming "harder and harder" to maintain in the face of 20 rockets which had fallen ­ without injury ­ since it began.

Like a fractured mosaic that can crumble under stress, the ancient walled city of Jerusalem often feels as if it might be on the verge of destruction. The place is held holy by Christians, Muslims and Jews and it attracts fervent believers of every possible stripe. For centuries, the sacred city on the hill has been bedeviled by its extremely potent sects' appeal. Mutual mistrust and old grudges routinely set off pious fury between religious rivals whose holy sites overlap.

Now, apocalyptical politicking has brought the squabbles of prominent Christian clergymen into the public arena, too. It's no wonder that some devout Christians suspect the "time of tribulations" is nigh and that doomsday soon will follow.

The three most prominent evangelical Christian groups in Jerusalem were left fuming after the archbishops of the Latin patriarch, Syrian Orthodox, Episcopal and Lutheran churches made a sudden and formal declaration against Christian Zionism. Their congregations are largely made up of Palestinian Christians.

The document first circulated in cyberspace on 22 August 2006, the anniversary of the date which had been flagged by Princeton's respected (if also controversial) Islamicist scholar, Bernard Lewis, as a critical anniversary of the Prophet Mohammed's night-flight on the winged horse Buraq.

Lewis hypothesised that the Iranian regime might be tempted to reenact the "divine white light" which is said to have touched the farthest mosque on that momentous August night, by unleashing a rogue nuclear strike to annihilate Jerusalem.

In the wake of a month of bloodshed in Lebanon, and ongoing military attacks inside Gaza, threat levels across the region were cranked up after this Ivy League academic concluded that mutually-assured destruction (MAD), the cold-war's existential deterrent, could no longer be a constraint. For jihadists bent on martyrdom, weapons of mass destruction that guarantee death would (according to Lewis) be viewed as an enticement to push the button. While bracing for a possible atomic Armageddon, Jerusalem's high priests lashed out at Christianity's Zionist wing for heightening the anxiety. When the next day dawned after all, it was like an answered prayer.

A rift among the faithful

The Jerusalem Declaration on Christian Zionism begins by citing one of the best known New Testament beatitudes, "blessed are the peacemakers" - and then goes ballistic. It denounces brash Christian evangelists, who give comfort to Israeli warriors, for spreading a "false doctrine that condemns the world to the doom of Armageddon and corrupts the Biblical message of love, justice and reconciliation." It was signed by Michel Sabbah, the Catholic archbishop appointed by Pope John Paul II, as well as the Lutheran bishop Munib A Younan, the Anglican bishop Riah Abu El-Assal, and the Syrian Orthodox patriarch, Swerios Malki Mourad.

Three faith-based Protestant charity groups that have been active in Israel since the Ronald Reagan era were livid after these high-placed ministers branded them heretics. Earnest theo-cons with global reach, mega-bucks, and soft southern twangs had effectively been sandbagged online. A week later, leaders from the International Christian Embassy Jerusalem, Bridges for Peace, and Christian Friends of Israel posted a six-point group rebuttal.

The evangelicals scorned the Christian patriarchs for ignoring the Hamas government's stated aim to destroy Israel, and argued that denouncing Israeli "occupation and militarism" was only half the story. Showing solidarity with Israel should be seen as "a blessing and not a threat," they said. Furthermore, the rejection of literal interpretations of Biblical scripture enabled the persecution of Jews for 2,000 years, and "under-girded" the inquisition and the holocaust. So there.

Malcolm Hedding, an Assembly of God preacher from Durban who penned the Christian Zionist retort, also hinted that the priests in the old city may be pushing a hidden agenda: "These outrageous statements come at a time when we are gathering momentum. The high church is competitive and alarmed at our success. Maybe they are not so lofty," he told me. "We all deserve to be treated with dignity and respect, and I wonder why we were not approached first for a civilised dialogue over a cup of tea. We are not monsters, but Christian people. The apocalypse is a very volatile issue and they know it. The book of Revelations is part of scripture, and is not to be disregarded as irrelevant or fanciful. But airing Christian dirty washing in public is abhorrent," he huffed.

The rift is not helped by the fact that the come-lately Protestants have no claim to coveted Christian property that dates from the crusaders and knights templar. Key sites where Jesus was born, preached his sermons, performed miracles, or was crucified and allegedly resurrected were divided up long ago, and gospel-spouting evangelicals must visit them, following the guidelines of the established churches. "I was shocked to see all the icons and incense inside the church of the holy sepulchre," confessed Earleen Butts, an Oklahoma Sunday-school teacher who has faith that her personal guardian angel will ward off harm throughout her holy-land pilgrimage. Stylised rhinestone wings and a halo were pinned to her purple T-shirt and she clutched a plastic pint of mineral water from "Jacob's Well".

An Armenian seminary student at a cafe near Jaffa gate pointed out that the harshly worded Jerusalem declaration was signed only by a quartet of Arab Christians, and did not reflect a consensus: at least a dozen senior Christian clerics in the holy city failed to weigh in on the matter. The offended evangelicals posted blogs and lay low for a few weeks. Meanwhile, within a fortnight, Pope Benedict XVI's address at Regensburg University on 12 September re-aired the medieval notion of Islamic evil and eventually resulted in firebomb attacks on seven churches in the West Bank and Gaza. All Christians in the region suddenly were put on the defensive, even if the majority has little to do with the Vatican.

Jerusalem's divided heart

Religious disagreements inside Jerusalem can get ugly, and invariably reverberate around the monotheistic world. Ultra-orthodox Jews have spat on Christian pilgrims visiting the stations of the cross on the Via Dolorosa, and Muslim clerics have screamed vitriolic threats at Uri Ariel, a Knesset member intent on testing Islamic tolerance by announcing plans to re-erect a synagogue beside the 7th-century silver-domed al-Aqsa mosque. Provocatively, he affirmed his commitment by pacing out the construction site with a posse of armed guards.

Jews wailing prayers at the sacrosanct Western Wall of their ruined temple, which was sacked by Roman soldiers in 70 CE (Common Era), sometimes are pelted with stones from this mosque, which once had its pulpit torched by a psychotic Australian tourist in a purported attempt to hasten the second coming by burning down the Islamic structure.

No one denies that a welter of prophecies in the Bible and the Qur'an pinpoints this white stone city in the volatile middle east to be ground zero for the apocalypse. It is not surprising that security helicopters hovered overhead on 9 October 2006 when 100,000 people took to Jerusalem's streets in full ceremonial dress to show gratitude to the Israeli Defence Forces with a grand march.

Muslims were fasting for the holy month of Ramadan, and generally kept their distance from the daylight processions of Jews that sent the city into gridlock. Among the marchers were nearly 5,000 evangelical Christian Zionists, from eighty different nations, waving a motley collection of flags and striding in the footsteps of Jesus.

Some teens sounded an Old Testament ram's horn before hitting the pavement, and Christian pilgrims queued to donate their blood for IDF and settlement clinics. "Our support of Israel is based on the promise that God made to Abraham 4,000 years ago. All Jews and Christians believe that one day the messiah will come - so let us forget any disparities", said Hedding, who heads the International Christian Embassy Jerusalem and welcomed throngs of Christian pilgrims for an annual Feast of the Tabernacles week. "Israelis need to know that they have friends," he emphasised.

Coachloads of Christian tourists stopped outside army bases near the Lebanese border, or toured the hills of Samaria and Judea. Others bobbed in the Dead Sea, crossed the barbed-wire checkpoints into Bethlehem, and Brazilians baptised one another in the Jordan river.

With friends like these

Most Christian Zionists pledge to back Israel against any detractors, to help repatriate Jews to settlements in the promised land, and eventually to stand by for Armageddon and ascend to heaven as the world ends. Prophetic Bible verses from both the Old and New Testaments add gravitas to their pamphlets and websites add gravitas to their pamphlets and websites.

Some secular Jews, like Tel Aviv banker Shelly Lash, view these enthusiastic new best friends as self-serving. "New Testament prophecies mandate that Jews convert or die before their rapture can get underway," she sniffed. "They obviously don't count on being our best buddies for eternity."

The Christian Zionist movement offers Israelis financial support from born-again Bible-belt Christians, principally in the United States, Germany, South Africa, and Scandinavia. Proselytising to convert Jews to Christianity is outlawed, although clandestine efforts to Israeli Muslims have been condoned by at least one cabinet minister. In recent years, since Binyamin Netanyahu's time in office (1996-99), Christian friendship and investment have been courted assiduously by the Israeli government, which launched a long-heralded Christian Allies Caucus of legislators in the Knesset in January 2004.

Josh Reinstein, a spokesman for the caucus, grumbled that Michel Sabbah, the outspoken Palestinian Latin patriarch, "is not particularly a friend of Israel," but invited him to educate some senators about the differences between Christian denominations. "We were ignorant about the particulars," he admitted, and confirmed that most face-to-face encounters are made with Christian Zionists who "give the Jewish nation political and moral support." Women's issues and visa problems are of particular concern to the caucus.

The burgeoning Christian Zionist movement has gained political clout in the US ever since Republican strategist Karl Rove galvanised the "moral majority" red states to vote as a bloc, spotlighting family values and contentious issues such as abortion rights and gay marriage. Christian broadcasting networks have been a godsend to the political public-relations industry, and standing shoulder-to-shoulder with Israel is a reliable touchstone for conservative grassroots campaigns. The flock of Christian Zionists is said to number at least 400,000 (see Paul Rogers, "Christian Zionists and neocons: a heavenly marriage," 3 February 2006).

An article in the Jerusalem Post recounted the Lazarus-like revival of the American televangelist, Pat Robertson. It gave goosebumps to Toby, a messianic Jew from Baltimore who was staking out a high kerb so she could videotape her Christian friends on the march. The firebrand Bible-thumping pastor and former presidential candidate, who founded the rightwing Christian Coalition of America and has promoted Dead Sea mudpacks on his populist TV shows, has been selected as the new face of Israeli tourism for post-Lebanon war adverts aimed at the Christian right.

During the July-August 2006 war between Hizbollah and Israel, tourist revenues slumped precipitously by 40% in Israel. Robertson has since drawled an abject apology for suggesting that God smote Ariel Sharon comatose in January 2006 after the old general agreed to surrender Biblical lands to the Palestinians. Robertson is said to be renegotiating a contract with a consortium of businessmen to build a $50m Jesus theme-park in Galilee, called "Christian Heritage Park", but nicknamed "Jesus-land" by cynical locals. The land will be leased free of charge in exchange for financing all construction and creating new jobs in a moribund economy. The landscape may have been peppered by Katyusha rocket-craters, yet this offbeat project is expected to lure at least a million more Christian visitors annually to the remote site where Jesus fed a multitude with a few loaves and fishes.

Well-heeled Jewish-American princesses cannot be counted on to revitalise the Israeli tourist economy unassisted. In the United States, Protestants outnumber American Jews by more than fifty-to-one, and the wooing has begun in earnest. Economic miracle-workers, at least in the short term, will take precedence in Israel over the second coming.

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Hassan Jabareen, the general director of Adalah, a body championing Arab rights in Israel, said he expected more legal wrangling over what is and what is not a combat situation.

"We foresee in the future another legal battle on the question of what is the scope of combat operations," he said.

Known as the Intifada Law and roundly criticised by international human rights organisations, such as Amnesty International, the law was passed by the Israeli parliament - the Knesset - in July last year.

It gave the Israeli military complete immunity from claims by declaring the entire West Bank and Gaza Strip to have been a conflict zone from late 2000, when the second intifada (Palestinian uprising against Israeli occupation) broke out.

However, the Supreme Court cancelled the law on Tuesday thanks to a petition from Israeli and Palestinian human rights groups, paving the way for a flood of new claims and for old claims to be considered afresh.

"The Supreme Court's decision has nullified one of the most racist laws legislated by the Knesset in the last five years," said Jabareen.

"After this decision, Palestinians who have been injured or killed, or who have sustained property damage, outside the context of a so-called combat situation, can again submit tort cases for compensation in Israeli courts against the security forces."

Law violated the rights to life

In his judgement, Chief Justice Aharon Barak stated that the law exempts the state of Israel from liability in circumstances that have nothing to do with security. He ruled that the law disproportionately violated the rights to life, dignity, and property of Palestinians in the occupied territories and was therefore unconstitutional.

It could mean good news for Palestinians who suffer harm outside a combat situation. For example, if soldiers negligently or wilfully open fire on them, torture or abuse them, or steal or destroy their property.

Matar Khamaiseh, a Palestinian vegetable dealer from Jenin, hopes he will be able to ask for compensation for the harm he has suffered. Khamaiseh was dragged to an olive grove by Israeli soldiers, beaten and shot at from close range in August this year, according to the testimony he gave human rights workers.

"This is a big step - the complete immunity that Israel had has gone," said Yoav Loeff, spokesman for the Association for Civil Rights in Israel (ACRI).

"I don't know the numbers but there are a lot of cases pending that will now be reactivated."

Adalah and ACRI were among organisations claiming that the Intifada Law sent out a message that the lives and rights of those injured in a so-called conflict zone have no value, as the courts would not come to their aid and those who caused their injuries would face no punishment.

They emphasised that the law grossly violated the fundamental principles of international humanitarian law and international human rights law, which apply in the occupied Palestinian territories.

And they said it was also contrary to Israel's own "Basic Law: Human Dignity and Liberty", which applies to Israeli settlers in the West Bank. A decision that it did not also apply to Palestinians would create a constitutional apartheid regime, Adalah argued.

But Palestinians still face an upward battle to get compensation for harm they suffer, according to Sharwan Jabarin, general director of Al-Haq, a Palestinian human rights organisation, in Ramallah.

"This is a first step. But anyone launching a case still has to prove everything and still has only a limited time frame after the incident to get everything together for the case," he said.

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It was not clear, however, if Israel would allow him in or if he even would be able to cross because of the fighting. As he headed there two loud explosions were heard on the Gaza side.

Jabour said that Israel has agreed to let Haniyeh in without the money. The secretary-general of the Palestinian Cabinet, Mohammed Awad, also told Al-Jazeera that Israel agreed to Haniyeh's entry without the money.

There was no immediate confirmation from Israel, but European monitors said the Rafah crossing would not be reopened Thursday.

Israeli authorities ordered the crossing closed earlier Thursday after Haniyeh notified Egyptian authorities he was carrying $35 million, Jabour said.

Israeli security officials confirmed that Israeli Defense Minister Amir Peretz ordered the closure to prevent Haniyeh from bringing in the money. It was not known where the money came from, but Haniyeh was on his first trip abroad and visited top supporters Syria, Iran and Sudan.

Haniyeh's government has been badly crippled by U.S. and Israeli-led international economic sanctions that have left it unable to pay full salaries to its 165,000 workers. Top Hamas officials have recently smuggled millions of dollars over the border to help keep the government operating.

Haniyeh decided to cut the trip abroad short after Wednesday's assassination of a Hamas-linked judge that came two days after gunmen shot dead the three young children of a Fatah-allied Palestinian intelligence officer.

The escalation in violence has reduced the chances of forging a coalition government of Hamas and the more moderate Fatah party, which is led by Palestinian President Mahmoud Abbas.

Egyptian officials said the prime minister declared he was carrying the money after arriving in Egypt from Sudan on his way back to Gaza. The officials spoke on condition of anonymity because they were not authorized to speak to the press.

Maria Telleria, spokeswoman for the EU monitoring mission, said after the gunbattle that all 16 monitors were safely evacuated and the border would remain closed Thursday.

"Now it is dark, the monitors will not be coming back," she said. "But I don't know what is going to happen tomorrow."

Haniyeh left Gaza on Nov. 28 and had planned to travel for a month. But his trip drew criticism because the violence raging in the Palestinian territories and the need to continue to negotiate on a new government between his Hamas party and the rival Fatah.

The watch hands moved slowly. One of the participants in the meeting suggested that it be stopped because of the approach of the Sabbath. After ascertaining the precise time that the Sabbath would begin, Baker insisted on continuing. Suddenly an American official came into the bureau and whispered something into the ear of one of the secretary's aides, who transmitted the contents to the secretary. Baker blanched. He rose and in a trembling voice said to the prime minister that he had just been informed that his mother had passed away. He apologized that he would not be able to continue the meeting and left, followed by the other members of the American peace team.

A sigh of relief was heard in the prime minister's bureau. One of the senior people present thanked God aloud for His intervention, which had saved Israel from Baker's talons. However, after he recovered from his mother's death, Baker refused to leave Israel to its own devices. He succeeded in seating its representatives at the Madrid conference next to Palestinian and other Arab delegates. When Israel hardened its heart, he threatened to block the transfer of the special American aid for the absorption of immigrants from the Commonwealth of Independent States. At that time the "Baker initiative" looked to the Likud government like a dangerous attempt on the part of president George H.W. Bush's administration to force a peace agreement on Israel. Baker was so keen on advancing an agreement between Israel and the Palestinians that among Likud members the rumor spread that the man was motivated by anti-Semitism. Otherwise, why was he so indefatigably engaged with the Israeli-Palestinian conflict? What was wrong with that man, they wondered, that was making him act so obsessively about trying to make the Israelis live in peace? "There is no doubt that this individual is a bit anti-Semitic," asserted a senior person in the prime minister's bureau, whose feelings reflected Shamir's. "Let him leave us alone. Is there a dearth of conflicts in the world?" The conflict between the two administrations ended badly and threatened to muddy the relations between Israel and the United States. In June of 1992, Shamir lost the election to Yitzhak Rabin, and half a year later Baker followed him into retirement, together with his boss, the first president Bush. Now, 14 years later, the ghost of James Baker is again hovering above the skies of Jerusalem. Now sitting on Shamir's chair is Prime Minister Ehud Olmert, who was serving as a junior minister during the days Baker was first haunting Israel. Immediately upon taking up his exalted position, Olmert once again donned his old Likud garments, as though he had never taken them off.

It is no wonder that in Olmert's immediate environs, paranoid talk about Baker the Terrible is again being heard. Once again, preposterous diversionary maneuvers are being undertaken with the goal of depicting the document that bears his name as hallucinatory. "This is an internal American document that does not concern us," was the prime minister's description this week of the Baker-Hamilton document.

Why has the Israeli leadership gone on the defensive? Because of Baker's personality, which radiates aggressive imperiousness, and because for the first time a senior American figure has acknowledged that the absence of an agreement between Israel and the Palestinians contributes to the unrest in the Middle East and even beyond it. All that was missing was that someone there would come to the conclusion that this unending conflict is endangering American interests in the region and even beyond it. This linkage resonates in Europe and is endlessly reiterated in the ears of Israeli representatives. Every Jewish child in France can explain the connection between the new Muslim anti-Semitism in his country and the second intifada. Everyone understands what a terrible price this conflict is exacting; it's only Israel that is insisting on reducing its dimensions as though it were a neighborhood spat.

The attitude toward Israel that is expressed in the Baker-Hamilton document is a direct result of the diplomatic paralysis and the prime minister's perpetuation of the status quo in all arenas. This is one of the reasons, along with the wretched war in Lebanon, for the mortal blow to his popularity.

Olmert will save himself - and us - only if he starts to implement the desire of the voters who put their trust in him. Only by taking diplomatic initiatives will Olmert be able to dispose of the need to take defensive measures against the Baker-Hamilton report and dispel at least some of the unease that has spread in this country since Ehud Olmert sat down in former prime minister Ariel Sharon's chair.