JERUSALEM, April 18 (JTA) — Eight months before the start of a new Christian millennium, Israel finds itself squarely in the middle of a Christian- Muslim conflict centered on a town traditionally associated with Jesus. The conflict in Nazareth, if left unresolved, could have worldwide repercussions, not the least of which would be the cancellation of Pope John Paul II’s planned trip to the Holy Land next year to take part in millennium celebrations. As Israeli officials attempt to cope with the conflict, both Christian and Muslim officials on both sides of the divide are charging that Israel is favoring the other side — which leaves the Jewish state in the unenviable position of satisfying no one. Indeed, even after a committee of Israeli ministers appeared to side this week with the Nazareth Muslims, Islamic leaders there rejected the ministerial decision. At least 4 million Christian pilgrims are expected to visit Israel next year to mark the new millennium — but recent events in Nazareth may well threaten those celebrations. Because of biblical tradition, Nazareth — the biggest Arab town in Israel, with a population of 65,000 — has the image of a Christian city. But only 40 percent of its inhabitants are Christian. The conflict erupted over a city plan to build a large plaza in time for the millennium celebrations near the Church of the Annunciation, where according to Christian tradition the Archangel Gabriel told Mary that she was to give birth to Jesus. The town’s Muslim population objected to the construction plan, saying it would damage the tomb of Shihab a-Din, the nephew of Saladin, the Muslim warrior who ousted the Crusaders from the Holy Land in the 12th century. The town’s Muslim residents, who have set up a protest tent at the planned construction site, want to build a mosque there. Neither side appears ready to back down. Islamic political leaders made the controversy their main issue when Nazareth’s municipal elections were held last fall. Islamic candidates won 10 of the 19 seats on the town council. But a Christian candidate, Ramez Jeraisi, was re-elected mayor. Because of conflicting political agendas, the municipality has been virtually paralyzed since the elections. Frustrated that they were unable to take control of Israel’s largest Arab town, Islamic politicians stepped up their involvement in the controversy surrounding the site near the church. Two weeks ago, the dispute turned violent. At least seven people were injured during confrontations between Christians and Muslims that coincided with the Easter holiday. Israeli riot police were called in as youths from each side threatened to escalate the violence. “It was shocking,” said one Israeli police official. “Muslim youths attacked every vehicle whose driver they believed to be Christian. “It was a real intifada,” he added, referring to the 1987-1993 Palestinian uprising against Israel. The violence immediately sparked warnings about the millennium festivities. Officials in Nazareth and in the Israeli government have already invested millions of dollars in development projects — including the renewal of the ancient market, paving new roads and rehabilitating old buildings — in preparation for the influx of tourists expected to arrive from all over the world to mark the millennium. But as things stand now, even the regular stream of tourists, mostly Israelis who visit the town on weekends, has dwindled. “If the conflict continues,” said Amir Orly, a tourist guide, “the pilgrims will not come — neither to Nazareth, nor to the Sea of Galilee, nor will they come at all.” Ami Ayalon, head of the Shin Bet domestic security service, has warned that the controversy could spill over to other Arab population centers in Israel. Palestinian Authority Chairman Yasser Arafat sent emissaries who tried, unsuccessfully, to mediate the dispute. Unable to reach an agreement among themselves, Christians and Muslims in Nazareth tossed the ball into the hands of the Israeli government. Mayor Jeraisi said it was only fitting that Israel intervene because the land in dispute is state land — that is, it is up to Israel to decide how it should be used. Islamic politicians countered that the land is under the control of the wakf, the Muslim body responsible for overseeing Islamic holy sites. At first, Israeli Interior Minister Eli Suissa threw his support behind the Islamic cause — a move that drew a sharp reaction from the Christian world. Senior church delegates, among them the Latin Patriarch, Michel Sabah, and the custodian of holy sites on behalf of the Vatican, Giovanni Batistelli, wrote a sharply worded letter to Prime Minister Benjamin Netanyahu warning that “whoever gives in to extortionists today will give in to terrorism tomorrow.” The church leaders also warned that the pope would cancel his trip to the Holy Land if Israel sided with the Islamic side. Last week, the director general of Israel’s Religious Affairs Ministry, Avi Blustein, was fired after he claimed that Christian representatives threatened to shut down their churches for the millennium year if the mosque was built near the Church of the Annunciation. A church representative said Blustein’s claim was an attempt by Israel to dodge its own responsibility for the conflict. On Sunday, an Israeli ministerial committee reached a decision in the controversy, allowing Nazareth’s Muslim community to build the mosque — provided they removed the protest tent they had erected at the site. Salman Abu-Ahmad, an Islamic leader in Nazareth, rejected the decision. “The decision is not serious,” he told JTA. “It does not meet our minimum demands.” Abu-Ahmad called on the Israeli government to recognize that the land in dispute belongs to the wakf, adding that only once such recognition is given will Muslim leaders be willing to discuss the size of the mosque. Abu-Ahmad charged that the Israeli government was giving in to international pressure — meaning the church. For their part, church officials expressed the hope that the ministerial decision would help restore calm to Nazareth. Just the same, however, they described that decision as a “victory for the Muslims.” Even were the decision to win the approval of both sides — which appears unlikely, given the initial reactions — it may be subject to change after Israel holds its elections next month. Once a new government is formed, Israeli leaders may once again have to take a stab at working out a compromise acceptable to both Islamic and church officials.