Since the intifada began two years ago, Jerusalem Mayor Ehud Olmert had boasted that Arab residents of eastern Jerusalem had opted to stay out of the violence for fear of losing Israeli social service benefits.
With the recent arrest of an East Jerusalem terrorist cell deemed responsible for several recent attacks -- including the July 31 bombing of a Hebrew University cafeteria that killed nine people -- Israelis have been asking: Arabs in East Jerusalem, too?
The discovery of the cell nearly coincided with a survey by the prestigious Jerusalem Institute for Israel Studies that reported alarming figures concerning the standard of living in Jerusalem's Old City and raised questions about 35 years of Israeli rule in East Jerusalem.
Unlike Israeli Arabs, most Arab residents of East Jerusalem who came under Israeli rule following the 1967 Six-Day War do not carry Israeli citizenship. They are not entitled to Israeli passports, are not entitled to vote and cannot be elected to national bodies. They are eligible to vote in municipal elections, though most of them choose -- with help from Palestinian groups -- not to, so as not to legitimize Israeli rule in the city.
Still, they do have Israeli identity cards, which allow them free movement throughout Israel and relatively free movement in and out of the West Bank -- freedom that the terrorist gang allegedly put to bloody use.
Most important, Arabs in East Jerusalem are entitled to the range of social benefits available to all Israelis, such as national health insurance, unemployment payments, minimum wage benefits, child allowances and other social security benefits.
It was access to such services that Olmert figured would deter residents of East Jerusalem from joining the Palestinian campaign of terror -- a calculation that authorities now say was tragically wrong.
True, the level of terrorism emanating from East Jerusalem has been low, in comparison with terrorism from the adjacent West Bank. Far fewer Israelis and tourists visit the Old City today than in past years, and very few hostile acts have been carried out against them.
But the hatred is still there.
The merchants in front of their empty souvenir stalls on David Street look at the few Israelis who dare to enter the Old City walls -- mostly religious Jews on their way to the Western Wall or other sites in the Jewish Quarter -- with sad and angry eyes.
"Why don't you understand? We don't want you here," said tour guide Ali Jadda, who spent 17 years in Israeli jails for throwing a grenade in the western part of the city, wounding nine Israelis. "You are welcome as tourists, but as occupiers, you are not wanted here."
That is the story in a nutshell: Many Jerusalem Arabs see the Jews as occupiers.
In Israel's 1948 War of Independence, Arab soldiers forced the Jews from the Old City's Jewish Quarter, ending a presence dating back centuries. In the ensuing 20 years of Jordanian occupation, evidence of Jewish history was systematically destroyed.
In 1967, Israel, after being attacked by Jordan, conquered the Jewish Quarter and the other parts of East Jerusalem. The conquered parts were annexed to Israel, but -- fearful of changing the country's demographic balance -- the inhabitants were not offered citizenship.
Thus, just as the Arabs do not want the Jews in Jerusalem, many would say that the Israeli authorities do not regard the city's 220,000 Arabs as equal partners.
The Jerusalem Institute for Israel Studies report showed the poor living conditions in the Old City. With some 280 people per acre, it is one of the most crowded places on earth. The population has grown rapidly since the unification of the city in 1967, due both to natural growth and the illegal immigration of Arabs from the West Bank who wanted to enjoy Israeli social service benefits.
Israeli authorities could not cope with the phenomenon: They lacked the space, budget and tools to provide the Arab population with modern housing inside the Old City walls.
Providing alternative housing would be too costly -- and would go against the Palestinians' nationalist credo. The result: burgeoning illegal construction, with rooms crowding on top of each other and basements turned into living quarters. Some 25 percent of the apartments in the Muslim Quarter have no shower, and a number of families often will share the same toilet.
Some Jewish families also are moving into the Muslim Quarter, living in homes purchased from Arab owners in roundabout ways. Under the guidance of the Ateret Cohanim settlers' organization, these Jews hope one day to outnumber Arabs in the Old City.
The Jewish families live under heavy protection: Surveillance cameras transmit images of people approaching the Jewish residences to Old City police headquarters, and armed guards respond to knocks on the doors.
Some 6,000 families, or about 35,000 people, live in the Old City. Of these, 68 percent are Muslims; 24 percent, Christians; and 8 percent, Jews.
Umm Raed, who lives in a shabby apartment in the Old City and suffers from diabetes, receives a regular unemployment allowance from the Israeli government. That's enough of an incentive to make sure none of her nine children join Hamas.
But, given the heavily politicized atmosphere and the incitement by Palestinian Authority agents, economic incentives aren't enough to win Israel much loyalty from Jerusalem's Arabs.
Hawks like Internal Security Minister Uzi Landau and his deputy, Gideon Ezra, say the cell's capture shows that anti-Israel feelings are endemic in the Palestinian population, regardless of their social and economic condition. The fact that the cell members received Israeli social benefits and worked in Israel proves it is not poverty that causes terrorism, they say.
Some are looking beyond last week's news to possible political solutions. The Jerusalem Institute study offers at eight alternative solutions to the conflict.
Ruth Lapidot, a law professor who chaired the report team, prefers one of them: Both Israel and the Palestinians relinquish sovereignty claims in the Old City and try to reach a functional agreement on running the holy area.
Israel has been open to various compromise proposals, but the Palestinian Authority insists on full sovereignty over all Arab neighborhoods and denies that the Jews have any connection to the Temple Mount, the Old City's crown jewel and the holiest site in Judaism.