Jerusalem's status is the central and divisive issue in Camp David talks

The past week of Middle East peace talks at Camp David has been punctuated by threats from one side or the other to walk out …

The past week of Middle East peace talks at Camp David has been punctuated by threats from one side or the other to walk out in disgust.

But if, by the time you read this, the summit has indeed broken down, and the Israeli and Palestinian negotiating teams are heading back home, it will have been the central and most emotive of the issues they have so long disputed that has doomed the search for a peace treaty again: the status of Jerusalem.

The Israeli Prime Minister, Mr Ehud Barak, flew off to the US a little over a week ago insisting that, although he was willing to make pragmatic compromises in the search for a full and final peace accord, there would be no concession where sovereignty in Jerusalem was concerned.

The "Jewish" west of the city, along with the "Arab" eastern sector and the walled Old City captured by Israel in the 1967 war, he said, would remain the united, sovereign capital of Israel. This, he made clear, was a "red line" he would not cross.

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The President of the Palestinian Authority, Mr Yasser Arafat, set out with an equally uncompromising stance: Those areas of Jerusalem captured by Israel in that war of 33 years ago would have to be relinquished, in their entirety, to Palestinian rule. East Jerusalem, he was adamant, had to become the capital of an independent Palestine. Otherwise, there could be no real peace.

Behind the rhetoric, the reality of Jerusalem is that the city constitutes two very distinct parts - divided roughly, although not formally, by the "Road One" highway that runs between west and east - and that central aspects of daily life in the eastern neighbourhoods are controlled by Mr Arafat's Palestinian Authority.

Since 1967, Israel has transformed the character of the ancient city. The city is now three times as large, due to the construction around the Arab city of 11 Jewish neighbourhoods, the last of which is still being built.

The population has also tripled. In 1967, the city had 200,000 residents - 130,000 Jews in the west and 70,000 Palestinians in the east. Today there are 600,000 people in Jerusalem, about one-third of them in the new Jewish neighbourhoods in the east. About 200,000 Palestinians live in the eastern section of Jerusalem. They have permanent residency cards but no Israeli citizenship.

Inside the Old City are the Western Wall, the holiest site in Judaism; the Church of the Holy Sepulcher, particularly sacred to Christianity, and the Al-Aqsa Mosque and its environs, the third holiest site of Islam.

Much of the education system, health services, social services, and policing among Jerusalem's 200,000 Arabs has become the de facto responsibility of the Palestinian Authority; the Palestinians have numerous official premises there; they control the Temple Mount in the heart of the Old City.

As far as can be judged from the reports leaking out of the summit, Mr Barak has been prepared to formally recognise that official Palestinian presence - but not fully. Israeli sources say he has evinced a willingness to sign a treaty that specifies Palestinian "autonomy" or "municipal authority" in East Jerusalem. Autonomy or authority, but not sovereignty.

The Israeli sources add, further, that Mr Arafat initially inclined to accept such definitions, and even proposed a division of responsibility in the Old City, but later backtracked. Palestinian sources, by contrast, indicate that Mr Arafat has never budged. His position, they say, has been to demand sovereignty throughout East Jerusalem. Full stop. No sovereignty, no deal.

The problem for both men is that the reality of daily life in Jerusalem may matter less for their respective peoples than the symbolism of the city. Mr Arafat has so consistently, and for so long, talked up the idea that Palestinian sovereignty in Jerusalem is a central element of independent statehood that his people are unwilling to accept anything less, and his opponents would tear him apart for compromising.

As for the Israeli position, it has moderated considerably in recent years. The very notion of "negotiations about Jerusalem" was unthinkable to most Israelis just a year or two ago. But despite that shift, Mr Barak may well believe that he would still find it impossible to win majority support for a peace deal in his promised referendum if he crossed the sovereignty "red line" he himself sketched out. And he may well be right.