A resolution appeared imminent when Israeli and Palestinian officials, in talks brokered by United States and European Union officials, agreed that 26 of the gunmen would return to the Gaza Strip, while 13 others would go to Italy.
Italy however, insists it did not receive any communication or requests to house the Palestinians, and would not consider accepting the men right now.
“We were treated in an arrogant and intolerable way,” said Italian Defense Minister Antonio Martino. “There are still things to clarify: for example, in what capacity would they come to Italy?”
U.S. diplomatic officials acknowledged that the Italians had largely been kept out of the loop.
Secretary of State Colin Powell spoke with Italian Prime Minister Silvio Berlusconi twice today, but so far, Italy has not reversed its rejection of the proposal, State Department spokesman Richard Boucher told a news briefing.
Some reports suggested that while diplomatic conversations may have been taking place, the plans had not been passed on to higher-level Italian authorities.
There is no word if any other country is willing to step in and accept the Palestinian men, considered by Israel to be terrorists responsible for recent suicide bombings and other attacks. In addition, Israeli and Palestinians negotiators remain at odds over the disarmament of the 39 gunmen.
A resolution to the standoff would pave the way for Israeli forces to withdraw from Bethlehem, the last major city still occupied by Israeli troops.
President Bush has demanded a full Israeli withdrawal from Palestinian-ruled areas and will reiterate his desire in a meeting with Israeli Prime Minister Ariel Sharon on Tuesday.
Those talks are expected to be intense, as Sharon continues his campaign to diplomatically isolate Palestinian leader Yasser Arafat. Sharon has been unwilling to embark on a new political process until the Palestinian Authority undergoes major internal reform.
U.S. officials have said Sharon cannot bypass Arafat, the accepted leader of his people and the Palestinian Authority.
“Chairman Arafat is the representative of the Palestinian people, as they have made clear,” said White House spokesman Ari Fleischer.
Meanwhile, outside the Church of the Nativity, there are signals the standoff is nearing its end.
Israeli troops erected four large white panels near the church’s entrance on Tuesday to shield the faces of the gunmen from journalists and brought in metal detectors.
Israeli Defense Minister Ben-Eliezer said he is ordering his troops to prepare for a withdrawal from Bethlehem, although no immediate signs were evident.
Eliezer comments coincided with Israeli tanks pushing through the West Bank City of Tulkarm, where the Israeli army says it arrested 30 wanted militants. Israeli forces also launched a raid into the Rafah refugee camp in Gaza.
Witnesses say the raid killed a 17-year-old Palestinian.