The Israeli occupation army pulled back to the outskirts of Bethlehem on Tuesday but Palestinian Christians found little to celebrate as the town of Jesus's birth faced a joyless Christmas. There were no festive lights in Manger Square, where Israeli occupation troops had patrolled for the past month after reoccupying the town following a Palestinian resistance bombing that killed 11 Israelis on a Jerusalem bus.

"Bethlehem is a sad city," Mayor Hanna Nasser told reporters under bleak, rainy skies. "It's the first time in the city's history that the Christmas tree is not lit -- in protest against the Israeli occupation." In an apparent goodwill gesture following appeals from Pope John Paul , the Israeli occupation army said it withdrew to the edges of Palestinian-ruled Bethlehem to allow Christmas observances to proceed. But it warned that it would "continue to operate according to the security situation and existing terror threats".

No occupation soldiers were spotted near the Church of the Nativity in central Bethlehem, where local Christian dignitaries were due to attend Christmas Eve midnight mass on Tuesday, or in any of the surrounding neighborhoods.

But occupation troops and armor continued to surround the West Bank town as they have done during much of the two-year-old Palestinian uprising for independence. The occupation army said Palestinian Christians with security permits, foreign tourists and pilgrims would be allowed into Bethlehem for Christmas events.

HOLIDAY GLOOM

But attendance was expected to be a far cry from the crowds that packed the town's cobblestone streets for holiday celebrations before the outbreak of Israeli-Palestinian violence in September 2000. Since then, souvenir shops have gone out of business, hotels have closed for lack of guests and the tour buses that once plied the streets have vanished.

Bulbs strung across Manger Street still read "2000 Welcome" -- as they did to greet the new millennium -- but the lights no longer work. Sitting inside his empty shop, Elias Giacaman, a vendor of carved olive-wood statuettes, had nothing to do but warm his hands over a small heater. "There are no tourists and we have sold nothing this year," he said.

"All I hope for is peace." Adding to the somber mood was Israel's decision to bar Palestinian President Yasser Arafat  from making his annual Christmas pilgrimage to Bethlehem for the second year running. It has accused him of not doing enough to stop violence.

Israeli occupation troops re-entered Bethlehem and imposed a strict curfew on November 22 after a resistance bombing carried out by a Palestinian from the town. They occupied buildings and conducted constant patrols, searching house to house and arresting dozens of suspected resistance men. The occupation army pulled back overnight, and plainclothes Palestinian police wearing white arm bands deployed in Manger Square.

The Israeli move came a day after Arafat lashed out against the occupation army's grip on Bethlehem and its reoccupation of much of the West Bank.

"As the whole world adorns Christmas trees, Bethlehem...and the rest of the Palestinian cities and villages...are suffering from the darkness, siege, destruction, killing, arrests and abuses against our people at checkpoints," Arafat said in the West Bank city of Ramallah.

Arafat, a Muslim, had annually attended Christmas celebrations in Bethlehem after it was handed to Palestinian control in 1995. He is now largely confined to his battered Ramallah headquarters after Israeli occupation forces took over the city.

CONTINUING VIOLENCE

Israel reoccupied every major Palestinian city and town in the West Bank, except for Jericho, in June following a wave of Palestinian resistance bombings which killed scores of Israelis.

On Monday, Israeli occupation troops arrested five Palestinians in the Bethlehem area, Palestinian witnesses said.

The occupation army said it carried out a raid in the Rafah refugee camp in the southern Gaza Strip , destroying a weapons smuggling tunnel, a building where explosives were found and an abandoned building. It said occupation troops came under fire during the operation.

Palestinian officials said Israeli occupation forces demolished nine structures, leaving more than 80 people homeless, and that three people were hurt in the explosions.

At least 1,735 Palestinians and 671 Israelis have been killed since the uprising began after peace talks broke down.

PHOTO CAPTION

A man sweeps in front of the Church of Nativity in Bethlehem as preparations are made for midnight mass Dec. 24, 2002. The Israeli occupation army said Tuesday it had pulled back to the outskirts of Bethlehem to allow Christmas festivities to proceed in the town where Jesus was born. Witnesses said occupation soldiers had pulled back to about 200 yards from the Church of the Nativity in central Bethlehem. (Magnus Johansson/Reuters)