These are conclusions reached by a UN mission that went to the West Bank, Gaza and Golan in late April and early May, a period, its report notes, when "dialogue between the two sides [Arabs and Israelis] was virtually nonexistent."

The document, which Juan Somavia, head of the International Labor Organization, presented to that UN agency's members now in session in Geneva, appealed for urgent measures to ease what was termed a dire economic and social crisis. A gradual lifting of border closings would go a long way toward alleviating the difficulties encountered by Palestinian workers and their families, the UN team believes.

"Likewise, measures to resume employment of Palestinian workers in Israel would serve to reduce the dramatically high level of unemployment," they say in the report. "Both of these measures would greatly ease the present crisis and facilitate the resumption of political discussions on a peaceful settlement of the conflict."

For his part, Somavia urges an enlarged program of technical cooperation, creating a Palestinian employment and social fund and providing aid to the Palestinian National Authority and local authorities as well as trade unions and employers to help ease unemployment, protect workers' rights and promote social protections and a social dialogue.

At a time when opinions are divided about which side has suffered more during the crisis -- with many Europeans emphathizing with the Palestinians while Americans have tended to condone Israel's military actions as a justified response to acts of civil terrorism -- Somavia says the UN report "must be read with a sense of empathy and compassion for all concerned." This, he adds, is not a conventional policy prescription in times of strife, but he is deply convinced it is necessary today.

"Any resolution of the conflict must be based on dialogue where the voices of workers in the occupied Arab territories and their families get a fair hearing in order to assist them in their hope of achieving conditions of decent work," the ILO chief says. "At the same time, the voices of workers in Israel must be heard and listened to. No one can be satisfied with the present situation or, worse still, a further escalation of conflict."

The ILO investigators found that real wages for Palestinians in Israel fell nearly 46 percent last year and the Palestinian Authority's revenue plummeted 70 percent. Real growth of the Palestinian GDP declined 12 percent.

Meanwhile, Israel suffered also, including from the aftershocks of Sept. 11. "High-tech industries have been most affected by declining activity in the US economy, followed by a 50 percent drop in tourist arrivals in 2001 as a result of Sept. 11 and the worsening internal security situation," according to the UN. Joblessness in Israel rose continuously last year, to 10.5 percent in the last quarter, and business was adversely affected by the drafting of 30,000 reservists to military duty.

"Palestinian and Israeli populations are paying a very high price for occupation and violence," the report says. "The economic and social situation in the occupied teritories is deteriorating daily with rising levels of poverty and unemployment which has become in practice a widespread humanitarian crisis."