A city longing for revival is seeing its hopes frustrated by political bargains and ancient graves

A WALK through the heart of this scenic but economically depressed northern Israeli city shows that it is in dire need of two things: large-scale investment in its flagging tourist industry, and an infusion of the spirit of conciliation.

Both of these were, at least in theory, due to come to Tiberias in the form of the Church of Scotland?s $20 million hotel complex project.

However, the Israeli government, backing ultra-orthodox Jewish groups, has now effectively suspended the project after the discovery of what is believed to be an ancient graveyard at the building site.

The ultra-orthodox believe that transferring the graves would amount to a sacrilege, and with two of their political parties in Prime Minister Ariel Sharon?s coalition, they appear, at least for now, to have the power to translate that into a thwarting of work on the project?s mainstay, a 74- room building with car park.

It is next to two hilltop mansions that date back more than a hundred years to the founding of the Scottish "mission to the Jews" in the Holy Land by David Watt Torrance, a physician who set up Tiberias?s first hospital.

The construction is also to include gardens, a small church, a swimming pool, and a pedestrian bridge to link the facility to the shore of the Sea of Galilee. It aims to earn enough funds to support the church?s presence in Tiberias, according to Fred Hibbert, the minister here who has been spearheading the construction.

The Israeli government has urged the church to reconsider its plans."We intervened to call upon the conflicting parties to stop the construction and negotiate" said a foreign ministry, spokesman, Emanuel Nachshon.

The Department of Antiquities, which, according to law, must first conduct a restoration dig at the site before the actual construction can begin, has failed to do so despite the fact that the church has advanced the department half a million shekels (?90,000).

"This is simply insane, we are making a grave mistake by not enabling the continuation of the building," said Yossi Paretzky, a legislator from the secularist Shinui party. "Tiberias desperately needs the jobs and investment and people willing to put $20 million into it are now being precluded from doing so because of some dry bones.

"This is not the first time there has been building on graves, many ultra-orthodox cities were built on graves."

He claimed that the real motive of the ultra-orthodox was to flex their political muscles. Members of the Knesset?s economics committee last week threw their weight behind the church?s project.

Signs of Tiberias?s economic and social woes abound. On one side of the century-old Church of Scotland property is an Israeli hotel that was abandoned in mid-construction, and along the road lining the Sea of Galilee are others that are laying off workers due to the drop-off in tourism that has accompanied the nine month old Palestinian uprising. The ripple effect is impinging on everyone?s well-being: shopkeepers, taxi drivers, restauranteurs.

The uprising has also brought to the fore anti-Arab hatred. A mosque visible from the church property dating back to before Israel?s creation in 1948 was attacked by an angry mob last autumn. They reportedly tried to set fire to it, but the stones would not burn.

One of the nearby hotels is the Ganei Hamat, built in 1984-85 after a long and bitter struggle with ultra-orthodox groups who took to the streets after graves were discovered there.

The director of the antiquities authority, Shaike Dorfman, said the cemetery at the church property is believed to be a Moslem one, and that the authority was waiting for the police to dispatch forces to protect the archeologists from ultra-orthodox protesters before the digging could begin.

With the church?s determination to continue the project, charges of anti-semitism and hints at violence are adding to Tiberias?s volatile brew. Last week a man waved a gun at a crane driver, Mr. Hibbert said, and the ultra-orthodox Shas party staged a small demonstration likening the construction to Nazi acts. "I think all civilized people respect graveyards," said rabbi Avraham Ravitz, deputy minister of education from the United Torah Judaism party. "There are always deviants such as cannibals who eat other people, but humans with feelings should understand our position."

Mr. Hibbert counters that the new hotel will actually promote good relations among the faiths and be "a place where people can meet across divides. We don?t close our gates to anyone and we would like to build a work here with reconciliation as one of our main functions."

Even with the Galilee?s history of miracles, that promises to be no small task.