Israel, this week has denied that indirect talks over a prisoner swap have renewed with Hamas following reports by Hamas to the contrary. On March 27, Israel Radio reported that Israeli Prime Minister Ehud Olmert's office had said Israel has yet to reach a compromise with Hamas over the exchange for captured Israeli soldier Gilad Shalit. Hamas had earlier said Israel had retracted its previous demand involving certain prisoners to be taken off the list or to be sent into exile.

Israel, however, has maintained it has said no such thing, insisting that it would only release 325 of Hamas' demanded 450, some of whom would be sent into exile either abroad or into the Gaza Strip. The remaining 125 would not be released at all, for what Israel says is their involvement in "terrorist" operations against Israelis. Hamas has rejected this offer, saying it would not accept the exile of any of its prisoners.

Meanwhile, three of the Nativity Church exiles, deported by Israel in 2002 after the Nativity Church standoff, have been asked to leave their host country Italy by the end of April. The three, 30-year old Mohammad Sa’id Siyam, , 48-year-old Ibrahim Salem Ubayyat, and 42-year-old Khalud Abu Nijmah, have lived in Italy for the past seven years under an agreement with the Israeli government to host them. Now, however, Italy says the funds for their stay have run out and they must leave by the end of the month. It is still not clear where the three will be sent if not home to Palestine.

Reconciliation talks between Palestinian factions have also been stalled. On March 26, Palestinian sources said the various factions were holding talks with each other in Syria and in Gaza in an attempt to smooth out their differences over key issues of contention. According to Egyptian sources, the conciliation talks between the factions – namely Hamas and Fateh – would resume in Cairo on April 2.

The Palestinians were dealt a major blow on March 23, when the PLO's second man in command in Lebanon, Kemal Medhat was assassinated. Medhat, along with three of his associates, were killed when a powerful roadside bomb went off as they were leaving the Palestinian refugee camp of Mia Mia in southern Lebanon. The next day, thousands participated in his funeral through the streets of Beirut, condemning the assassination, for which no one has yet to claim responsibility. Palestinian officials in Lebanon have said they would leave the investigation to the Lebanese authorities rather than point fingers of accusation. President Mahmoud Abbas denounced the killing, calling it an "act of terrorism."

Meanwhile, Israeli Likud leader set to form Israel's next government, Benjamin Netanyahu has said he would "negotiate peace" with the Palestinian Authority at a business conference in Jerusalem on March 24. He did not, however, mention the two state solution or any of the other key issues relevant to "peace". Rather, Netanyahu has been a proponent of "economic peace" for the Palestinians rather than any long-term and just political peace. In this regard, the European Union warned Israel on March 27 that EU ties with Israel would suffer if Netanyahu did not accept the two-state solution. "We Europeans are insisting that whatever the weighting is in the two governments [Israeli and Palestinian], the creation of a two-state solution must stand first and foremost," German Foreign Minister Frank-Walter Steinmeier said. "We should not always have to start from the beginning again - that is my urgent appeal."

Chief Palestinian negotiator, Saeb Erekat also shot down the right-winger's proposal, saying Netanyahu's "peace plan" would only serve to prolong the occupation.

Luxemburg's Deputy Prime Minister for Foreign Affairs also said that the upgrading of EU-Israel trade and political ties were contingent upon Israel's commitment to peace with the Palestinians.

Apparently, US President Barack Obama is also a bit apprehensive of the new Israeli government. In a press conference on March 25, Obama said the status quo in the Palestinian-Israeli situation was "unsustainable" reiterating his country's determination to work towards a lasting peace. When asked whether Netanyahu and Avigdor Lieberman would make these efforts harder, Obama answered, "It's not easier than it was but I think that it's just as necessary."

Already, the signs are surfacing as to what kind of government Netanyahu will lead. On March 25, Israel Radio announced that a secret agreement had been reached between Netanyahu and Israel Beitenu head Avigdor Liebemen, slated to hold key positions in the Netanyahu's government, over construction in the E-1 area of Jerusalem. According to the report, the two have agreed to construct 3,000 settlement units in the Maaleh' Adumim settlement as part of the E-1 project, thus completely severing the West Bank from Jerusalem from the east. The project, which is highly contentious because of this geographic isolation and the vast illegal settlement expansion it involves, was frozen under Olmert due to American pressure.

In terms of Israel's recent invasion of Gaza, which left over 1,400 Palestinians dead, Human Rights Watch issued a report on March 25 accusing Israel of war crimes in Gaza through its use of phosphorus shells. In its report, the organization said Israel's use of the highly incendiary bomb was not incidental or accidental, but revealed "a pattern or policy of conduct." Dozens of Gazan residents were killed or suffered severe burns from these shells, which Israel shot into highly residential areas. Israel, however, continues to maintain that it used the shells in accordance with international law.

Furthermore, on March 22, a UN human right group accused Israel of using children as human shields during its war on Gaza, citing the case of an 11-year old boy in the Tel Al Hawa neighborhood of Gaza Strip who was used by Israeli soldiers to enter a Palestinian house before them. Radhika Coomaraswamy, one of the UN experts who drafted the report and who visited Gaza after the invasion, said there had been "too many violations to list," also citing incidents of Israeli soldiers shooting children and bulldozing a home with a woman and child inside.

In the West Bank, 15 people were injured on March 27 in demonstrations against Israel's separation wall. The demonstrations, which take place on a weekly basis in the Ramallah-area villages of Nilin and Bilin, are non-violent and include Palestinian, international and peace activists. Two weeks ago, American Tristan Anderson was seriously wounded in the head during one such demonstration. This week, several Palestinians and one foreign journalist were wounded by Israeli soldiers there to quell the protests.