Leading article: The little town that symbolises the suffering of the Middle East

In one of the unfailing ironies of the place religious believers call the Holy Land, its most famous emblem of peace - the little town of Bethlehem - is once again a symbol of its troubles. Its economy is in crisis. Concerns over security are keeping many tourists away. Israel's security wall has cut the town off from much of its agricultural hinterland. Unemployment stands at 65 per cent. The West's financial boycott against the Palestinian Authority has meant no salaries have been paid at the municipality for four months.

It is a complex business. The wall reflects legitimate Israeli security concerns; half the suicide bombers in 2004 are said to have come from Bethlehem. And, although Israel ceased its military activity in the Gaza Strip a month ago, Palestinian militants continue to launch rockets against Israel from there. On the other side, the recent escalation of internecine strife between the Palestinian factions has added to the tensions which have been building since voters ousted the corrupt Fatah leadership and replaced it with the more militant Hamas. Yesterday fierce gun battles raged between the two groups; some predicted all-out civil war.

But Bethlehem tells us something revealing. The Archbishops of Canterbury and Westminster, who arrived there on a Christmas pilgrimage earlier this week, have expressed concern - not just at the barrier which is "strangling" the place, but also at the flight of Christians from the town. Christians constituted more than 85 per cent of the population in 1948; today they make up just 12 per cent. This matters because it is the Christians who own most of the town's hotels, restaurants and shops. Throughout the West Bank and Gaza there is an exodus of the middle classes responsible for what little prosperity there was.

Prosperity for Palestinians holds the key to peace. A meeting is urgently needed between President Abbas and the Israeli Prime Minister, Ehud Olmert. They have a lot to discuss. High on the agenda must be the rocket attacks on Israel and the Israeli incursions into the Palestinian territories. They must also make progress on the release of Palestinian prisoners, in which they would be assisted by Hamas freeing the Israeli soldier they captured last June. To do so would be an important signal from Hamas that it intends to continue to move along the path of political realism it adopted by contesting the elections in the first place. But their guiding strategy must be to give the Palestinians the prospect of prosperity. Mr Olmert needs to look beyond short-term security considerations and ease those Israeli restrictions that are hampering the organic growth of the Palestinian economy. A new horizon of prosperity, even more than symbolic political gestures, is essential to dispelling the sense of despair that grips so many Palestinian youths.

Shifts are needed internationally too. The recent Baker-Hamilton plan called for movement in US policy on the Israeli/Palestinian problem. President Bush needs to heed that. And the European Union, which has salved its conscience in the past by giving more aid to charities working with Palestinians, needs to get off the fence and apply some political pressure to Israel.

In the midst of it all, the innocents - terrified children, disabled people, women cut off from hospitals by security checkpoints - continue to suffer. Two of the three charities for which we are raising money in our Christmas appeal this year work with such people. Supporting them is the only gesture of solidarity open to most of us. We exhort our readers to be generous in their giving. In the end, though, personal hopes must be allied to politics. If there is anything good in the present flux it is that it offers a chance to find new ways forward.