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THE SITUATION ROOM

War in Gaza; Labor's High Hopes For Obama

Aired December 29, 2008 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


SUZANNE MALVEAUX, CNN ANCHOR: Happening now, breaking news: Israel's massive bombing campaign against Palestinian militants and fears of a ground assault across the border. This hour, a new declaration of all-out war and whether the violence and bloodshed will spread.
Plus, president-elect Obama's newest test before he even takes office -- how this new Middle East crisis may throw a curve into his global strategy.

And love in the time of the Holocaust, an impossible romance? Well, it turns out to be fake, a new chapter in the tale of books that turn out to be bogus -- all that and the best political team on television.

Welcome to our viewers in the United States and around the world. Wolf Blitzer is off today. I'm Suzanne Malveaux. And you're in THE SITUATION ROOM.

The breaking news from the Middle East, Israeli warplanes pound Gaza for a third day and tanks stand ready on the border to join the massive assault on the militant group that runs Gaza. That is Hamas. Israel says it is targeting the Hamas leadership, holding it responsible for a barrage of rocket attacks on southern Israel.

Israeli police report more than 40 rockets and shells fired by militants today, while Israeli forces carried out at least 20 airstrikes. Four Israelis have died during the past three days of fighting.

Palestinian medical sources report that more than 300 Palestinians have been killed in Israeli airstrikes, most of them Hamas militants.

More on that -- 1.5 million people are packed into Gaza. It is a tiny strip of land, where Egypt and Israel meet. It is just 146 square miles, about twice the size of Washington, D.C.

Our CNN's Paula Hancocks is in that conflict zone -- Paula.

(BEGIN VIDEOTAPE)

PAULA HANCOCKS, CNN CORRESPONDENT: Suzanne, here on the Israeli/Gaza border, we have been seeing fire heading in both directions all day, Israeli airstrikes showing no signs of letting up, and neither are the militant rocket attacks into Israel. Israeli tanks taking the road to Gaza as fighter jets and Apache helicopters fly overhead. Israel continuing to flex its military muscles.

From the border, we see airstrike after airstrike, black plumes of smoke rising consistently from the densely populated strip. One and a half million Gazans live in fear of the next strike, civilians caught up in a battle Israel insists is not targeted at them. But the air assault is by no means one way, as we found out just inside the Israeli border.

(on camera): I think that's actually a red alert in this particular area now. We're hearing rockets coming in. Let's just get down.

(voice-over): At least 75 rockets hitting Israel today. Hamas militants apparently undeterred by more than 300 Israeli airstrikes on Gaza since Saturday.

Israel's aim to stop the rockets is not yet working. Does this mean it has to send the ground troops in?

It certainly looked like they would today. Tanks moving in, more being transported from other parts of Israel.

We were moved from the area we were reporting from on the border, and it quickly became a military zone. Israeli officials have already warned ground troops are a real possibility, an escalation that can only lead to more injuries and more deaths whether Hamas fighter, civilian, or Israeli soldier.

(on camera): Governments around the world are calling on both sides to stop the violence, but it's far easier to ignite this conflict than to calm it down -- Suzanne.

(END VIDEOTAPE)

MALVEAUX: Thank you, Paula.

The Bush administration is blaming Hamas for the violence in Gaza, accusing the group of showing -- quote -- "its true colors as a terrorist organization."

The United Nations secretary-general is condemning both sides and is pressing for a cease-fire now, while Muslim nations accuse Israel of being the aggressor.

Let's bring in our senior White House correspondent, Ed Henry, who is with president-elect Obama in Hawaii. Ed, we haven't heard from Obama about the situation in Gaza, but obviously they're watching these developments very closely.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: They are, Suzanne.

But you're right. The president-elect is not speaking out. And when we pressed his staff on exactly how he would approach this conflict, we're not getting any answers. They're continuing to go back to the refrain of there's only one president at a time. You can understand on one hand why they want to say that. Obviously, they want the U.S. to speak with one voice. They don't want it to be confusing around the world about the fact that, you know, there's an outgoing administration, an incoming administration.

So, they also don't want to look like they're stepping on President Bush, because, obviously, president-elect Obama is not setting foreign policy yet. But the fact of the matter is that a lot of people around the world right now are looking to president-elect Obama for leadership. And they're really craving to know exactly how he would approach this conflict.

It seems to be spiraling out of control. And I can tell you that, candidly, some Obama advisers privately are saying, look, this situation is changing so fast, it's different now than it was a week ago. Who knows what kind of situation we're going to inherit on January 20.

And that's just the problem for the incoming administration. Barack Obama during the campaign had very high hopes about forging a Mideast peace. It's looking like it's going to be that much harder to actually achieve that, Suzanne.

MALVEAUX: And, Ed, in following Barack Obama during the campaign, he was very consistent. He was pretty tough on Hamas, tough warnings against Hamas and terrorist activities and also saying that Israel has a right to defend herself. Do we have any expectation that Obama's administration is going to have a distinctive Middle East policy from President Bush?

HENRY: That's a good question, because we have been putting that to transition officials as well. And they basically won't answer about whether there will be a new approach.

And, as you lay it out, it's exactly correct. During the campaign, Barack Obama faced Republican accusations that Hamas wanted him to win the U.S. election. He said, that was outrageous, you will remember, and said flatly that he had the same policy as John McCain in terms of dealing with Hamas as a terror group.

And also he did say Israel has a right to defend itself and sounded a lot, frankly, like President Bush. So, on both of those issues, it doesn't really -- there doesn't seem to be much daylight between his approach and the Bush administration's approach. And so until he starts speaking out January 20 and beyond, it doesn't look really like he's going to have much of a different approach from the U.S. standpoint, Suzanne.

MALVEAUX: OK, Ed, thank you so much -- Ed Henry.

Hamas may have its critics in the Arab world, but the Israeli onslaught in Gaza is generating a lot of renewed sympathy for Palestinians in Gaza.

CNN senior Arab affairs editor Octavia Nasr has been watching the Arab media's handling of the story.

And, Octavia, what are you seeing?

OCTAVIA NASR, CNN SENIOR EDITOR FOR ARAB AFFAIRS: Suzanne, it's a huge story for Arab media. Sympathy is right. You're seeing a lot of emotions.

Here is a taste.

(BEGIN VIDEOTAPE)

TZIPI LIVNI, ISRAELI FOREIGN MINISTER: We need to give hope for our people.

NASR: Israel's foreign minister, Tzipi Livni, appearing on the Arab world's most-watched TV channel, Al-Jazeera, making the case for Israel's attacks on Gaza, on her left, dramatic pictures of Gaza in smoke, the fiery logo with the words -- quote -- "Gaza Under Fire."

The exchange gets personal when the anchor responds to Livni's comment that Israel regrets human loss and is only targeting the militant group Hamas.

UNIDENTIFIED MALE (through translator): Tell me, Ms. Livni, is attacking the Islamic University and the mosques and the United Nations and civilians' homes and the children and the women, despite all of the international condemnation, all of that and you still think you're only targeting Hamas?

LIVNI: Hamas needs to understand, enough is enough.

NASR: Livni and other Israeli officials also appear in a clip promoting Al-Jazeera's coverage, a clip whose tone is sympathetic to the plight of Palestinians.

Other Arab TV channels take the same view. So do political cartoons in the region's newspapers. Here, "Al-Hayat," a Saudi-owned newspaper, shows Palestinians as sardines in a can. Its label reads -- quote -- "Israeli Society Incorporated," and from the Palestinian newspaper "Al-Quds Al-Arabi," a jet representing -- quote -- "Israeli terror."

But, beyond the anger, newspaper headlines and opinion pages are full of disappointment at Arab leaders' lack of action. One headline from Lebanon's "As-Safir" newspaper sums it all up: "Gaza's blood gushes out, shaming the faces of Arabs and Muslims."

(END VIDEOTAPE)

NASR: So, you see, Suzanne, this is very emotional for Arab media, and it's showing how Arabs feel. They're angry at Israel's actions and their government's lack of action.

MALVEAUX: Thank you, Octavia Nasr.

A top Illinois official now making a prediction about the embattled Illinois governor, as the state's lawmakers weighing impeachment move one critical step ahead.

Also, labor's high hopes for the next administration -- will union support earn them breaks from President Obama?

And the economic downturn, turning retail upside-down. Tens of thousands of stores are expected to close in coming months. Will that include some of your favorites?

(COMMERCIAL BREAK)

MALVEAUX: New developments now in the corruption case against the governor of Illinois. As you may remember, the prosecutor said the allegations against Blagojevich would make Abraham Lincoln roll over in his grave. Well, now the state's second in command is predicting that the governor will be out of office by Lincoln's birthday.

Our CNN's Ed Lavandera is following the legal and political wranglings -- Ed.

ED LAVANDERA, CNN CORRESPONDENT: Suzanne, we could hear for the first time portions of the wiretapped conversations involving Governor Rod Blagojevich in the coming days. We learned that as the governor's attorney and state lawmakers in Illinois were tangled in a three-hour showdown over impeachment.

(BEGIN VIDEOTAPE)

LAVANDERA (voice-over): Verbal swords slash away in Illinois...

UNIDENTIFIED FEMALE: Perhaps we have different sets of ears.

LAVANDERA: ... between the committee of state lawmakers deciding whether Rod Blagojevich should be impeached and the governor's attorney.

EDWARD GENSON, ATTORNEY FOR BLAGOJEVICH: But the fact of the matter is -- and I said this to Mr. Lang -- offering is a crime. Where does it say he offered anything?

UNIDENTIFIED MALE: I just respectfully would suggest that the reading comprehension classes I took are much different than the ones you had. Thank you.

LAVANDERA: The impeachment committee is one step closer to hearing selected portions of the wiretapped recordings, now that federal prosecutors are asking a judge to release four of the taped conversations. But, until that happens, both sides are arguing over what the tapes will reveal.

GENSON: There's nothing in that tape that shows that people were asked to -- to give money or -- or campaign contributions or anything. It's just talk. That's what it is, unfortunate talk, talk that -- that was -- was -- shouldn't have been made perhaps, but not action -- but not actions. UNIDENTIFIED MALE: Well, the fact is that it's a crime in the state of Illinois to offer to do a public act for value. Whether somebody takes you up on that offer is irrelevant.

LAVANDERA: Ed Genson says the impeachment hearings are unfair to the governor and that there's not enough evidence to justify pushing Blagojevich out of office.

GENSON: The fact is, we're fighting shadows here. We're fighting unnamed people. We're fighting witnesses that aren't available. We're fighting people that are -- haven't been indicted.

LAVANDERA: But the governor is facing an unconvinced audience, skeptical of his claims that he did not seek to profit from appointing someone to fill Barack Obama's Senate seat.

The committee is also considering unrelated allegations regarding his administration and fund-raising practices.

GENSON: Is anyone here to going to stick up for the governor?

LAVANDERA: It's clear Blagojevich is digging in for a long fight, but Illinois's lieutenant governor predicts Blagojevich will be out of office by mid-February.

LT. GOV. PAT QUINN (D), ILLINOIS: You know, the 200th anniversary of Abraham Lincoln's birth is February 12 of next year. And I don't think Governor Blagojevich will be governor at that time.

(END VIDEOTAPE)

LAVANDERA: Governor Blagojevich insists he has done nothing wrong and in fact continues on business as usual, showing up to work every day at his Chicago office -- Suzanne, back to you.

MALVEAUX: Thanks, Ed.

Just days before the new year, let's check where the big auto industry bailout stands right now and the prospects for an even bigger rescue down the road. It may all hinge on president-elect Obama and how much heat he feels from the autoworkers union.

Let's bring in our CNN's Samantha Hayes.

And, Samantha, obviously, big labor contributed a lot of time, a lot of money during Obama's campaign. Do you get a sense that they're looking for some favors?

SAMANTHA HAYES, CNN CORRESPONDENT: Well, they certainly may try. You know, soon, they're going to start getting some of the billions of dollars in bailout money. And there's already an indication that GM will be coming back for more as soon as the new Democratic president is in the White House.

(BEGIN VIDEOTAPE)

HAYES (voice-over): Even before the Iowa caucuses more than a year ago, Barack Obama let big labor know he was a friend.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: If the Democratic Party needs anything, it needs (INAUDIBLE).

HAYES: Workers will soon be testing that promise. And the United Auto Workers in particular. Under President Bush, the big three are getting more than $17 billion, but union bosses don't like the terms of the current deal.

RON GETTELFINGER, UAW PRESIDENT: I think it's unfair to say that workers have to work at a rate that's comparable to other foreign brands that manufacture here.

HAYES: Economist Peter Morici says a Democratic administration bodes better for big labor, but the economy will decide how far the incoming president will go. PETER MORICI, ECONOMIST, UNIVERSITY OF MARYLAND: When you get a Democratic administration, you get changes at the Labor Department and in policies. And that generally makes it easier for unions to organize. They will get some concessions from Obama, but he's not going to give away the store.

HAYES: The Center for Responsive Politics says unions spent about $180 million to put Democrats in power in 2008. Other sources say it was much more than that. Nevertheless, the influence of labor unions may be fading.

GARY BURTLESS, BROOKINGS INSTITUTION: Unions have been very hard hit over the last 30 years in -- mainly because they haven't been successful in organizing new workers.

HAYES: As a senator, Mr. Obama sponsored the Employee Free Choice Act. If signed into law in 2009, employers would be required to recognize a union if a majority of workers signed membership cards, but the priority is still jobs.

THEA LEE, POLICY DIRECTOR, AFL-CIO: I think one of the first issues facing the new administration is going to be the size and the shape and the content of the economic recovery package. And that's where working people are really going to need strong advocates to make sure that we're creating as many good jobs in the United States as possible.

(END VIDEOTAPE)

HAYES: And speaking of strong advocates, unions may also have a friend in president-elect Obama's choice for labor secretary, Hilda Solis. Her parents were union workers and she has supported a higher minimum wage and a right to form unions -- Suzanne.

MALVEAUX: Thank you, Samantha Hayes.

A candidate who has the potential to become the new face of the Republican Party has released a C.D. with clearly racial overtones. In a word, it's insulting to president-election Barack Obama.

CNN's Jim Acosta, he is joining us with this look at this political controversy.

Jim, this is obviously someone, he's raised a lot of eyebrows here over the C.D. And what is the latest fallout over this?

JIM ACOSTA, CNN CORRESPONDENT: Well, so far, he's defending this. And the release of this C.D., on the face of it, sounds like a rookie mistake, Suzanne, but Chip Saltsman is far from a newcomer on the national political stage.

(BEGIN VIDEOTAPE)

CHIP SALTSMAN, REPUBLICAN NATIONAL COMMITTEE CHAIR CANDIDATE: We have already got a big crowd here for Governor Huckabee.

ACOSTA (voice-over): Chip Saltsman made a name for himself as national campaign manager of Mike Huckabee's upstart bid for the White House.

SALTSMAN: I'm officially announcing my candidate -- candidacy for Republican National Committee chairman.

ACOSTA: Now a candidate for chairman of the Republican National Committee, Saltsman is doing damage control after mailing RNC members a controversial C.D. loaded with racially-tinged songs, one of the tunes aimed at the next president.

UNIDENTIFIED MALE (singing): Barack, the magic Negro.

ACOSTA: A crude parody of the children's classic "Puff the Magic Dragon," the song first touched off a brief firestorm when it aired on Rush Limbaugh during the campaign. Limbaugh blamed the media for stoking the controversy.

(BEGIN AUDIO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: Every one of you out there that think you have got something here on "Barack the Magic Negro," I'm going to try to help you and save you.

(END VIDEO CLIP)

ACOSTA: Saltsman defends the C.D., telling CNN: "I think most people recognize political satire when they see it. I think RNC members understand that."

But current RNC chairman Mike Duncan says he's appalled in a statement to CNN. "The 2008 election was a wakeup call for Republicans to reach out and bring more people into our party."

JOHN AVALON, INDEPENDENT POLITICAL ANALYST: There's a crowd of conservatives that takes a special pride in being anti-P.C. What I don't think they fully appreciate it is, it comes across somewhere between being indifferent to hostile. And that's how they have gotten in the larger problem they now face, preaching to an ever smaller choir and looking for votes only in a group that is increasingly old, white and rural. ACOSTA: A concern echoed by Colin Powell, who recently singled out Limbaugh as part of the party's problem.

COLIN POWELL, FORMER U.S. SECRETARY OF STATE: Is this really the kind of party that we want to be?

ACOSTA: Liberal media critics say the issue is bigger than Limbaugh.

KARL FRISCH, MEDIA MATTERS FOR AMERICA: It's unfortunate, but it's not surprising. This -- this type of rhetoric, this type of hate speech and fear-mongering happens every day on conservative talk radio.

(END VIDEOTAPE)

ACOSTA: One Republican who is coming to Chip Saltsman's defense is Ken Blackwell, the former Ohio secretary of state and an African- American who is also running for the top job at the RNC. Blackwell blamed the media, telling CNN -- quote -- "Unfortunately, there is," as he puts it, "hypersensitivity in the press regarding matters of race" -- Suzanne.

MALVEAUX: The controversy continues. Thanks, Jim Acosta.

Did Iran stir up the Gaza violence by providing weapons and training to militants? It may be a no-win scenario for Israel and Hamas. But could Iran come out ahead?

Plus, hundreds of Cubans are lining up, leaping at the opportunity to become citizens of another country.

And a love story out of the horrors of the Holocaust, why did a survivor make it up? And is the fallout just beginning?

(COMMERCIAL BREAK)

(NEWS BREAK)

MALVEAUX: Right now, Iran is stirring the cauldron of tension and violence in Gaza. We're investigating Tehran's support for Hamas and whether it is profiting from it.

Plus, no one denies it's a powerful love story, but a book about romance blossoming in a Nazi concentration camp apparently was nothing more than a dream.

And shopping in the new year may be a whole new experience, with consumers' cash drying up and stores vanishing.

(COMMERCIAL BREAK)

MALVEAUX: You're in THE SITUATION ROOM.

Happening now: day three of fighting and still no letup in what Israel has dubbed its all-out war with Hamas at the border with Gaza, Israel airstrikes vs. Hamas rocket attacks. The White House says the Hamas rocket attacks have to stop.

Iran's supreme leader calls on the Muslim world to rise up against Israel's attacks on Hamas. The U.S. and Israel say it's Iran who's bolstering Hamas with weapons, money and training.

And the escalating tensions in the Middle East and the U.S. economy on the brink, well, how is president-elect Barack Obama balancing his first international crisis with the economic meltdown at home?

All of this, plus the best political team on television.

Wolf Blitzer is off today. I'm Suzanne Malveaux, and you're in THE SITUATION ROOM.

Israel maintains relentless airstrikes on Gaza. Hamas lobs rocket after rocket at southern Israel. And, in Iran, that country's supreme leader urges the world's Muslims to unite against the Israeli attacks.

CNN's Brian Todd joins us now.

Brian, does Iran have a role in what Israel today believes may be in those airstrikes?

BRIAN TODD, CNN CORRESPONDENT: Well, Suzanne, Iran is, at the very least, trying to rally support in the Muslim world for Palestinians in Gaza, but Israeli officials believe Tehran is up to much more than that.

(BEGIN VIDEOTAPE)

TODD (voice-over): With each airstrike, anti-Israeli protests in the Arab and Muslim world ratchet up, that pot being feverishly stirred from Tehran -- the Iranian leadership calling for Muslims around the world to show their anger toward Israel, defend Palestinians in Gaza. U.S. and Israeli officials tell CNN Hamas militants in Gaza have been supported by Iran in the past, with weapons, cash and...

ISAAC HERZOG, ISRAELI SECURITY CABINET: We know of Hamas operatives, commanders and soldiers who are trained in Iran itself. We know that. So there is close cooperation and the exchange of know-how and activities.

TODD: Know how, he says, like advice on how to make the Kassam rockets fired into Israel. Contacted by CNN, an Iranian official said there's no evidence to support those claims. Officials and analysts we spoke with say whatever level of support Iran has given, it doesn't mean Iran is waging a full proxy war against Israel through Hamas now. They say Iran's ties to fellow Shia leaders of the group Hezbollah are much closer than they are to Hamas' Sunni leadership. Iran's support for Hamas is basically to counter U.S. backing of Israel and, analysts say, the blockade of Gaza by Israel and Egypt makes it very tough for Tehran to get anything to Hamas. But don't think Iran is not using this conflict to its advantage, as it has in the past.

SHIBLEY TELHAMI, BROOKINGS INSTITUTE: Iran benefits in terms of Arab public opinion in this environment, because the Arab public is very angry. They see the pictures and they blame Israel. They blame the U.S. for supporting Israel.

TODD: Another strategic success for Iran here -- diversion of the world's attention from its own nuclear program.

(END VIDEOTAPE)

TODD: Israeli officials have been working for months to focus attention on Iran's nuclear program in a campaign to get the new Obama administration to act quickly on it. Now all eyes will be on Gaza and the concern over whether this conflict will escalate into something bigger -- Suzanne.

MALVEAUX: And, Brian, how do we anticipate this is going to affect Obama's team in dealing with Iran over their nuclear ambitions?

TODD: It all ties in. One analyst who does polling in the Middle East tells us 80 percent of Arabs polled recently believe the U.S. is a greater security threat to them than Iran is. He says that will make it difficult to rally public opinion in the Middle East around any American effort to get Iran to give up its nuclear program. So all of this seems to tie in right now.

MALVEAUX: OK.

Thank you, Brian.

This crisis, of course, has been simmering for some time.

CNN's Jim Acosta joining us now -- and, Jim, you've got this all laid out.

What is the latest thing that has touched off the latest round of attacks?

ACOSTA: Well, this has been brewing for some time. And I think a lot of Americans have been surprised to see all of this flare up.

But let's map this out for you. The six month truce between the Hamas government and Gaza and Israel expired a week ago. But in reality, the truce had started breaking down two months ago.

Let's look at this. Rocket attacks by Hamas militants against Israel became more frequent. Then Saturday, it all came to a head. Shortly before noon, Israel responded, launching air strikes -- more than 100 tons of bombs -- on security compounds in Gaza.

Since then, Palestinian militants have fired dozens of rockets into Israel, including a strike that killed an Israeli man. On Sunday, Hamas militants fired more rockets into Southern Israel. That's where a lot of the activity has been over the last 48 hours. That killed a second Israeli.

Israel retaliated with more than 40 air strikes on the Egyptian border with Southern Gaza, targeting -- get this -- some 40 tunnels. This is important.

Israel says those tunnels are being used by Hamas to smuggle weapons into Gaza.

If people are wondering how do these rockets, how do they get these weapons?

Israel says here's how.

The Israeli government approved a measure, in the meantime, allowing some 7,000 Army Reservists to be called up. Today, militants in Gaza fired more than 40 rocket and mortar shells into Southern Israel.

Israel has responded to that with 20 more air strikes in Gaza and one assault.

The Arab street has been having a field day with this. An Israeli F-16 dropped rockets on the Islamic University of Gaza. Israeli Defense Forces say that site has been used as a center for weapon research and development. But Hamas security sources say a mosque and a family home has also been hit by Israeli rockets. Palestinian medical officials say five children died in that attack.

So far, the death toll in this crisis well over 300 people.

What's the impact?

Protests mainly -- not just here in the United States, but across the world. If you look at the map, in England, Greece, Lebanon -- where there was violence two years ago in this region. And Iran, as Brian Todd mentioned just a few moments ago, trying to capitalize on this crisis.

And, Suzanne, I talked to an expert over at the Council On Foreign Relations earlier today. He says expect this situation to last for some time -- well into the new Obama administration -- Suzanne.

MALVEAUX: It's fascinating to see how it's all mapped out and how it impacts the rest of the world.

Thank you so much, Jim.

ACOSTA: You bet.

MALVEAUX: The economy at home is in meltdown, as the fighting in the Middle East flares up -- how is Barack Obama going to balance the most pressing issues he'll confront on day one?

The best political team on television is here to weigh in.

And the world of retail turned, well, upside down. With more upheaval to come in 2009, will your favorite stores survive?

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

MALVEAUX: We want to take you to some live pictures now. And you are listening and looking at live pictures out of Gaza City here. This is new video -- brand new video that is just coming in right now to THE SITUATION ROOM.

We are looking at and listening to pictures of explosions that are happening over Gaza City. Obviously, this is a story that we have been following throughout the day. We have -- there's been some back and forth between Hamas issuing the rockets -- firing rockets into Southern Israel and Israel with some punishing air strikes and attacks that have happened over the last 24 hours or so.

You can see it is dark there in Gaza City.

I want to bring in Jim Acosta, as well, to discuss what we have been watching here. These are brand new pictures. And we were listening to -- I even spoke with the Israeli ambassador to the United States, asking him whether or not we might see just this type of thing unfolding and developing in Gaza City.

A lot of Palestinians quite upset, frustrated and worried whether or not they would see additional air strikes. But the ambassador, earlier today, telling me that he wasn't sure whether or not that would happen at this moment, but that certainly that they were keeping an eye on what was going on out of Gaza itself and whether or not they would need to continue these type of punishing air strikes because of the rockets that have been fired consistently by Hamas, by their military.

And the ambassador insisting that they are trying to avoid, at the very least, hitting civilian targets or having civilians caught up in the crossfire of all of this. That he said this is all about hitting Hamas' military installations -- places where they're preparing those rockets, where their leadership is located -- Jim, what can you tell us about what you are watching?

ACOSTA: Well, I think all we have to do is look at this new video, Suzanne, and see that this is a situation that is unraveling in Gaza right now.

(SOUNDS OF EXPLOSIONS)

ACOSTA: Let's take a listen.

(SOUNDS OF EXPLOSIONS)

ACOSTA: Yes. You heard some pretty heavy explosions there -- some pretty loud bangs there in Gaza. And it's an indication as to where things stand over the -- over the coming days.

We heard the defense minister, Ehud Barak, say that this is all- out war, that he is going to and Israeli Defense Forces are going to take this as long as it takes.

And what we've heard throughout the day is that this is a continuation of the softening that they'd like to see of those positions in Gaza -- of those militant forces that they'd like to see suppressed.

And Israel has -- has decided to go forward with this.

If you look at the tape -- and here's the tape now. And we can listen to it. Obviously...

(SOUNDS OF EXPLOSIONS)

ACOSTA: Obviously, the continuation of these air strikes is something we're going to be seeing over -- at least over the next several hours this evening. And obviously, you know, the Israelis say that they are trying to hit these military sites with precision. We talked about this just a few moments ago, Suzanne, that the Israelis have been trying to hit tunnels in Gaza near the Egyptian border that they say is being used to bring weapons into Gaza.

You can see some smoke there in the video rising from some of those sites -- from some of those explosion sites there in Gaza.

But, Suzanne, this is an unraveling situation. It's something that the Israelis warned the world about earlier today, when they said that this is all-out war.

MALVEAUX: And, Jim, I want to bring in our panel -- the best political team on television -- our panel, to weigh in on what they are watching, what we're seeing here at this very moment.

Karen Tumulty, David Brody and Marcus Mabry -- all three of them looking at the same pictures that we're seeing now.

I want to start off with you, Karen.

This is obviously something that everyone is watching. And, you know, they take a look at what President Bush has done in trying to bring Middle East peace between Palestinians and Israelis -- something that he has failed to do, as previous presidents.

What are people going to be looking at, turning to Barack Obama, to address this issue?

KAREN TUMULTY, "TIME" MAGAZINE: Well, you know, interestingly, it was one of Barack Obama's main foreign policy criticisms of George W. Bush, that he had not done enough -- had not been aggressive enough in the Middle East peace crisis.

This is really going to complicate things for Barack Obama. And it is difficult at this point, too, for instance, to see him doing something -- like he had talked about going to a Muslim country very early in his presidency and giving a major address. This is going to complicate that and, I think, make it much more difficult to figure out where to -- which way to go forward. MALVEAUX: And once again, I want to remind our viewers that you are looking at brand new pictures now -- this in Gaza City. This is over Gaza. This is live pictures that we are watching. And we are hearing explosions that are happening now. And you can see the fire. You can hear the explosions that are taking place in this very specific area, Gaza City.

I want to bring in Marcus Maybury.

You know, we talk about the priorities of the Obama administration. And a lot of attention has been paid to Pakistan -- Pakistan and India. Pakistan obviously moving some of its troops to the Indian border. But now we are looking at the reemergence here of the conflict between Hamas and Israel forces.

What does this mean for Barack Obama's priorities?

Does he need to make a quick turn here?

Is this really one of the first tests for him when it comes to foreign policy?

MARCUS MABRY, "NEW YORK TIMES": Well, Suzanne, you know, I that actually the greatest challenge this presents to him is that foreign policy, as it was not a -- the driving issue in this election, as we initially expected it would be at the beginning of the campaign, you'll recall, was not supposed to be a driving issue in this presidency when it comes to the economic downturn that we're facing.

We are in the midst of an economic crisis. The greatest challenge of these foreign policy crises now presented to this new president is how in the world do you concentrate on the economic policies -- what can end up being a trillion dollar stimulus package, for instance, to keep the American economy -- to get the American economy back on track, when you're faced with these foreign crises, which are very much a matter of life and death?

There's always, when it comes to the presidency, a problem of too many immediate challenges one faces. And one of the problems is the president -- a new president can never know what will actually be his test.

Remember, George W. Bush was not supposed to be a foreign policy president. He was supposed to be a domestic president.

MALVEAUX: David...

MABRY: Barack Obama knows very well it's going to be hard to balance the economic issues with the foreign crises.

MALVEAUX: David Brody, we heard from Joe Biden before, issuing a warning, saying, hey, look, he thought that in the days ahead that, of course, Barack Obama would be tested.

We are looking at live pictures now here in Gaza. We're hearing explosions. We are seeing what's developing there. Obviously, a lot of tension in that area.

We have heard Barack Obama, on the campaign, talk about the need for Hamas to stop its terrorist activities and for Israel to have the right to defend itself.

Do we expect anything differently out of an Obama administration in trying to tackle this problem?

DAVID BRODY, CNN CONTRIBUTOR, CHRISTIAN BROADCASTING NETWORK: You know, Suzanne there's no reason to believe that we'll hear anything differently from Barack Obama -- a President Barack Obama. You know, this is the danger zone for him. And what I mean by that is you have Barack Obama, who goes in on January 20th, not necessarily considered a friend of Israel. He says he's a friend of Israel, but there's a lot of folks -- there are a lot of skeptics out there right now.

So he needs to show a little bit more in that direction, that he is a friend of Israel. And then, at the same time, you have the whole world community, if you will -- especially over there in the Middle East -- are all wondering, these neighbors countries, you know, how will Barack Obama be different than President Bush on this?

They may not get the answer they like. And I think that's the danger zone for Barack Obama -- how he handles this. He'll have to handle it very meticulously, very delicately.

All the while, you have the economic home front back here in America -- the stimulus package pretty much on auto pilot. You have a health care and an energy bill that will probably move forward, too.

So he's going to have to multitask and multitask pretty quickly, Suzanne.

MALVEAUX: I want to get back to our panel in just a moment. But first, I want our viewers to take a look. Now, this is quick turn tape of just moments ago, this video that we are seeing. We're hearing explosions. We are seeing explosions.

(VIDEO CLIP)

MALVEAUX: I want to bring in Nic Robertson, who is live in Jerusalem, to give us a sense of what you know about what is taking place here in Gaza -- Nic what are you hearing and what are you learning about these -- these air strikes?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Suzanne, we're getting some details about them. We could hear a number of explosions there. We've been told that two buildings that have been targeted in these -- in these attacks tonight, just a few minutes ago, were the Hamas foreign ministry in Gaza, a building there.

Also, we're told that an internal security building run by Hamas was also the target.

It's not clear if all those explosions were -- were the targetings of just those two buildings or if there were other targets. But those appear to have been the principle targets.

And in keeping with what we've seen over the last -- into four days here now -- of targeting of the Hamas security infrastructure and Hamas militants about to and preparing to launch missiles -- Suzanne.

MALVEAUX: Nic, can you give us any sense of whether or not those areas -- those targets are close to any civilian neighborhoods or facilities of that sort?

There's been a lot of talk and a lot of frustration that we've heard among some Arab leaders and some Palestinians that civilians are so close to these military targets that they're getting caught up in all of this in the crossfire.

ROBERTSON: Well, one of the things about targeting buildings at night is you do limit civilian casualties. And we don't have any figures yet from these latest strikes about what the casualties and who those casualties might be.

However, Gaza is a very, very small area -- about twice the size of Washington, D.C. It is a strip -- a coastal strip about 25 miles long, about nine miles across. A million-and-a-half people live there.

So hitting any building, any structure in such a densely populated area, has risks. And Israeli government officials have said that. The foreign minister, Tzipi Livni, said today that if people were aware of military supplies, of ammunition, weapons or fighters around them, then they should go to another place, because those fighters and military ammunition would be the targets.

So it is on everyone's mind that there is a potential civilian collateral damage. Indeed, 60 of the more than 350 deaths so far in Gaza have been civilians, according to the U.N..

But by targeting at night, as we're seeing right now, it does tend to limit those civilian deaths.

MALVEAUX: What is your sense of -- of the intention of the Israelis?

They have said, obviously, publicly, we've heard through various officials that they just want Hamas rocket attacks to stop and they want those tunnels between Gaza and the Egyptian border to be basically destroyed -- obliterated -- so that Hamas is not bolstered by that illegal smuggling of resources and ammunition.

Do you get a sense that there is any kind of political motive behind this, that perhaps they're exercising their military might, their muscle, to show the rest of the world that they are a strong deterrent?

ROBERTSON: Well, it is a very, very tough way to send a message to the rest of the world. I mean what political leaders here are saying is that they want to end Hamas' ability to fire missiles into Israel. What we've seen over the past 24 hours, Suzanne, is that Hamas tended to sort of get back on a war footing after being caught by surprise, essentially, over the weekend. They have fired about 75 missiles in the last 24 hours. That is double the number that they have fired in the past three day period, which tends to indicate that far from being stopped from firing those missiles, they're actually increasing.

How long can they sustain that?

What are their stockpiles like, given that the tunnels that helped connect them to the outside world and bring in supplies of missile parts and explosives, etc. through those tunnels to Egypt?

Now those are being targeted, how -- how limited will their supplies be?

But right now, their stated political objective, which is also a military objective, which is stopping Hamas from firing those missiles, it seems a long way from -- from being achieved right now -- Suzanne.

MALVEAUX: The people that you're talking to in Jerusalem, the Israelis, when they look at -- at these air strikes, are they supportive of the government?

Do they believe that this is something that is necessary to do?

ROBERTSON: At the moment, there seems to be a certain level of detachment, if you will, from this. There have been some small student demonstrations against these attacks. But the general conversation is not focused on the Israelis -- that large numbers of Israelis are dying or that large numbers of Israeli troops are being killed in this conflict.

Four Israelis have been killed so far, two in the past 24 hours; more than 20 wounded. So it doesn't seem to be a topic that's dominating the conversation at the moment. It's certainly not a topic that's coming up in such a way that it's going to cause a political shift in Israel such that the politicians here are going to have to rethink their strategy. Far from that at the moment -- Suzanne.

MALVEAUX: Nic, we want to thank you there for your updates.

Obviously, we'll get back to you if more news warrants.

But thank you so much.

Nic Robertson out of Jerusalem.

We're going to continue to following the breaking news in the Middle East.

But also ahead, it is an amazing and emotional love story about a romance blossoming in a Nazi concentration camp. Well, now it turns out that it's not even true. We're looking at the fallout. (COMMERCIAL BREAK)

MALVEAUX: Well, it was billed as a true love story that began during the Nazi Holocaust. But it wasn't true. And now the fallout may be just beginning.

Our CNN's John Zarrella is joining us now -- and, John, tell us about the story.

JOHN ZARRELLA, CNN CORRESPONDENT: Suzanne, that's just it. It was supposed to be a story that took root -- a love story that took root in a Nazi concentration camp. It was a love story so powerful, that Oprah Winfrey had the couple on her show not once, but twice.

Now it turns out that the story may have been more fiction than fact.

(BEGIN VIDEOTAPE)

ZARRELLA (voice-over): Since the 1990s, Herman and Roma Rosenblat had recounted their love story over and over. Herman was a young boy imprisoned at a Nazi concentration camp.

(BEGIN VIDEO CLIP, COURTESY WSVN)

HERMAN ROSENBLAT, AUTHOR: We didn't have nothing to eat. We only ate one slice of bread a day and water.

(END VIDEO CLIP)

ZARRELLA: Roma, a young girl outside the camp who, for months, threw him food.

(BEGIN VIDEO CLIP, COURTESY WSVN)

ROMA ROSENBLAT: I threw the apple over. And I threw out a piece of bread.

H. ROSENBLAT: The guards in the towers, if they see us, they shoot us. So we didn't talk. And I didn't have nothing to say anyway. All I was interested was just getting the apple.

(END VIDEO CLIP)

ZARRELLA: Years later, they meet on a blind date and are married. But today, this seemingly impossible love story may be turning out to be just that -- impossible. A soon to be published book titled "Angel at the Fence," about the Rosenblat's saga, has been cancelled and the publisher asked for its advance money back.

Rosenblat, who was a prisoner, has now admitted he made up the story of the girl and the apple. In a statement released by his agent, Rosenblat says: "Why did I do that and write the story with the girl and the apple? Because I wanted to bring happiness to people -- to remind them not to hate, but to love and tolerate all people." Ever since the story became public, including this children's book based on it, called "Angel Girl," some Holocaust scholars had questioned it. And experts say fabrications make people less confident in the Holocaust stories they hear.

DAVID MARWELL, MUSEUM FOR JEWISH HERITAGE: And on the far extreme, something like this could give fuel to those who are in the business of denying that the Holocaust ever took place.

ZARRELLA: It is also further grief for the publishing industry -- rocked in recent times by bogus book bombshells.

SARA NELSON, "PUBLISHERS WEEKLY": It seems to me that you don't need to be a well-trained fact checker to be somebody who would hear the story and say what you or I would say, which is wow, really?

Did that really happen?

ZARRELLA: According to their agent, Rosenblat says his tale was only a dream.

(END VIDEOTAPE)

ZARRELLA: A movie version of the Rosenblat's story remains in the works. Atlantic Overseas Pictures says theirs is a fictionalized adaptation so "the story retains its power to grip audiences worldwide" -- Suzanne.

MALVEAUX: Thanks, John.

ANNOUNCER: This is CNN breaking news.

MALVEAUX: We want to go back to Jim Acosta.

Breaking news out of Gaza.

Those air strikes -- I know that you've got more information -- air strikes from Israel into Gaza -- Jim, what have you -- what have you learned in the next several minutes?

ACOSTA: Well, I have to tell you, Suzanne, we don't a whole lot right now about what's happening. But you can see these pictures and see for yourself and hear for yourself that the situation is unraveling in Gaza City.

Here are some of those pictures right now. You can look at the -- the explosions there in Gaza City. You can hear the explosions. We heard Ehud Barak say earlier today that this was all-out war. And people might have been attempted to dismiss this as a bit of chest pounding, but I think we have to consider for a moment, Suzanne, that this is war in the Middle East tonight.

This is one more problem on Barack Obama's plate, as we are just three weeks from tomorrow from his inauguration -- Suzanne.

MALVEAUX: Jim, we know that the director of Gaza's emergency services from a wire saying that at least 10 Palestinians were killed and 40 wounded in the latest series of Israeli air strikes. Obviously, we're going to be watching this all through the evening as this develops here -- as the tensions mount in the Middle East.

I'm Suzanne Malveaux in THE SITUATION ROOM.

Up next, "LOU DOBBS TONIGHT".

Kitty Pilgrim is in for Lou -- Kitty.