No room at the inn as Bethlehem celebrates Christmas

In Rome, thousands of the faithful gathered in the Vatican's St Peter's Square as night fell for the blessing of a giant Nativity scene to the sound of accordions, hurdy gurdies and Christmas carols.

Pope Benedict XVI appeared at his window shortly after 1700 GMT to light an oil lamp for peace and make the sign of the cross as a blessing to the crowd in the square below.

Peace was also a central theme in Patriarch of Jerusalem Fuad Twal's Christmas homily to be delivered in Bethlehem.

"We ask for peace, stability and security for the entire Middle East," the homily reads. Twal, the most senior Roman Catholic in the Middle East, urges "the return of calm and reconciliation in Syria, in Egypt, in Iraq and in North Africa" in the text of a speech published ahead of delivery at midnight mass in the place of Christ's birth.

In popular uprisings in Tunis and Egypt which ended decades of "secular" dictatorships, Islamist parties have taken the front stage. Egypt's main

Islamist parties emerged on Saturday as winning 65 per cent of votes for party lists in the second round of the new parliament.

The UN Security Council says that Syria has killed more than 5,000 of its people in recent months, and Thursday attacks in Iraq killed 60 people, heightening sectarian tensions less than a week after US troops withdrew.

"O Child of Bethlehem, in this New Year, we place in your hands this troubled Middle East and, above all, our youth full of legitimate aspirations, who are frustrated by the economic and political situation, and in search of a better future," Twal's homily reads.

It also addresses the Palestinians, welcoming Palestinian Authority president Mahmud Abbas who was to attend the mass, and congratulating him "in his unfaltering efforts to achieve a just peace in the Middle East, a main thrust of which is the creation of a Palestinian State."

The address says the Palestinians "recently turned to the United Nations in the hope of finding a just solution to the conflict," and notes that "they have been asked to re-engage in a failed peace process," which "has left a bitter taste of broken promises and of mistrust."

As day broke on the not-so-little-town of Bethlehem, a few miles south of Jerusalem, residents readied to welcome thousands of pilgrims who wanted to see where the Bible says Jesus was born to a couple from Nazareth.

In the afternoon, Twal made his solemn entry into the birthplace of Christ accompanied by Palestinian Scouts playing bagpipes, an inheritance from the British mandate in the first half of the 20th century.

The procession led to Manger Square in central Bethlehem, where a huge poster at Omar's Mosque showed Abbas and late Palestinian leader Yasser Arafat.

Hotels and guest houses across this ancient town perched on the hilltops were packed to capacity, Palestinian officials said, with more than 50,000 visitors from around the world expected.

"Hotels are full. We have no rooms left even though the number of hotel rooms has multiplied in the last three years," Palestinian tourism minister Khulud Daibes told AFP.