Already broke and haemorrhaging a Christian population reduced to desperation by five years of intifada, the birthplace of Christ was this week sealed off from Jerusalem — just in time for Christmas — by an 8m (25ft) wall and huge iron gate resembling a nuclear shelter.

The wall and sentry posts are the latest stretch of the hugely controversial 423-mile (680km) barrier that Israel is building through Jerusalem and the occupied West Bank.

Israel regards it as the linchpin of the strategy by Ariel Sharon, the Prime Minister, of separation from the Palestinians, pointing to its success in stemming the flow of suicide bombers and gunmen into Israel.

But on the ground Bethlehem’s 30,000 Palestinians are walled off from Jerusalem, two of the most popular destinations for visitors to the Holy Land. “Bethlehem has become a big prison for its citizens,” Victor Batarseh, its Mayor, said.

Dr Batarseh, who has had to borrow from banks to pay municipal workers’ salaries for the past two months, said that the barrier would further harm the tourist and pilgrim industry, which accounts for 80 per cent of the town’s income. He said: “In the past four years tourism was nil owing to the second intifada. Three or four months ago it started to revive, but hotels have now called me saying that tourists are cutting short their stays because it is taking them two or three hours to get out of the town.

“These are the tourists we need. There is no use just having tourists who come in on buses for an afternoon, see the Church of the Nativity and go back to sleep in Jerusalem.”

Lieutenant-Colonel Aviv Feigel, head of the District Co-ordination and Liaison for Bethlehem, said that Israel had spent £4.5 million on the crossing to achieve a balance between security and access. Coach parties entering Bethlehem have to show their passports only on the bus, but exiting they must pass through a turnstile-and-passageway terminal while the coach and larger bags are searched elsewhere.

Only a limited number of Palestinians will be allowed through and will use a different line from foreign visitors. Lieutenant-Colonel Feigel added: “Bethlehem is a quiet area now but do not misunderstand the situation. In 2004 half of the Israeli fatalities caused by suicide attacks came from Bethlehem.”

The first tourists to pass through the barrier voiced dismay yesterday. “It’s like the Berlin wall,” said Maria Dubiel, from Poland. “We are from Eastern Europe and we know this kind of wall. We had such a wall between capitalism and communism. It is not necessary. It introduces misery.”

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