On Christmas Eve, the hearts and minds of millions of Christians around the world turn to Bethlehem, the traditional place of Jesus' birth. Christmas carols have always portrayed Bethlehem as a quiet and peaceful place and a source of hope and joy for people who believe the Savoir of mankind was born there.

However, 15-months of conflict between Israel and the Palestinians have taken their toll on this West Bank city and most Palestinians living there are facing a grim Christmas.

Just two years ago the mood during festivities here in Bethlehem was as bright as the star that topped the towering, decorated Christmas tree in Manager Square.

There was excitement everywhere as preparations for millennium celebrations and a much-anticipated visit by Pope John Paul II reached a fever pitch.

Donor countries and private investors spent $200 million improving the center of town around the Church of the Nativity, built over the grotto where tradition says Christ was born.

This year, however, there has been a drastic change in the atmosphere in Bethlehem.

Fifteen months of fighting between Israeli soldiers and Palestinian gunmen have severely damaged both the infrastructure in Bethlehem and its reputation as the number one tourist destination in the West Bank.

Nativity Street is lined with a gutted five-story hotel, piles of rubble from shops knocked down by bulldozers and buildings destroyed by tank fire. They are all reminders of Israel's 10 day re-occupation of this biblical town last October.

On the second day of the incursion 17-year-old Johnny Talgieh, an altar boy at the Church of the Nativity, was playing with his three-year-old cousin on Manager Square.

He was shot in the chest by what witnesses say was a stray bullet from a machine gun mounted on an Israeli tank. The family home is only a few meters away from the basilica and Johnny died in his father's arms.

Everyday, Yousef Talgieh says he visits the graveyard where Johnny is buried to cry for his son.

Mr. Talgieh says because his son was an altar boy, he feels the loss more acutely at Christmastime.

"I don't believe on Christmas we are going to do anything. The only thing that we can do is just to visit his grave, that is all. This is the only thing that we can do because we know Johnny prepared all the year for the holiday, for Christmas, he was working, he was making a lot of preparation, but because he is not here we are not doing anything at all," he says.

Even among those whose pain is not as deep, there is still a sense of loss here in Bethlehem.

Unemployment has reached 70 percent, poverty is high, occupancy in hotels built for the millennium is zero, the tourism industry is virtually dead.

Hanna Nasser is the Mayor of Bethlehem and has seen the city during the best, and now, he says, the worst of times.

"The mood, you see it on the faces of the people. The mood is sad. We have a sad mood on Christmas here. This city, the city of peace, the city of love, the city of joy... peace is missing in this city. Peace is missing in the surroundings. What will also be missing is the smile on the faces of the children," he says.

The Reverend Sandra Olewine lives in Bethlehem and is the United Methodist liaison from the United States to the Holy Land.

She says the tight closure imposed on Bethlehem by the Israeli military has made life very difficult for members of her church.

"Many of our congregation members haven't worked at all for 15-months. There is no light they see in the tunnel, that the situation is going to change. So there is a lot of despondency, a lot of despair, a lot of hopelessness and so people are very discouraged," she says.

The Reverend Mitri Raheb leads the Christmas Lutheran Church in Bethlehem. He says the story of Jesus' birth mirrors the current experience of Palestinians today.

"The Christmas story, as it is in the Bible, talks about a child being at risk, a family on the flee as refugees and about Herod and massacres of children, which means it is exactly in this context that the Christmas story gets its meaning. It is not just a story, which has nothing to do with reality. On the contrary, the Christmas story is a story of the reality of many people, and certainly people in Palestine today," he says.

As Yousef Talgieh deals with the emotions surrounding the first Christmas without his son Johnny, he says he hopes his son did not die in vain.

"We really miss him, and the uncles are missing him, all the family is missing the boy. We are not going to have any kind of celebrations and I hope, really I hope, that the blood of my son will just go without any price. I hope that the price will be a peace for everybody, especially from Bethlehem. Bethlehem is a city of peace. It will be the bridge, I hope that it will be the bridge, to a real peace between Israel and the Palestinians," he says.

A large monument to the memory of Johnny Talgieh has been erected by the people of Bethlehem. Chiseled into the white stone is Johnny's face and verses from the Gospel of John (11:25-26), about eternal life for the faithful.

So while there is a dark cloud hanging over the holiday season this year in Bethlehem, Christians here say their faith is firm and they still find comfort and hope from the birth of Jesus and story of Christmas.