JERUSALEM — All Christian churches and major shrines were shut throughout Israel Monday and Tuesday as Christian leaders protested a government decision allowing a mosque to be erected near the Basilica of the Annunciation in Nazareth.

On Tuesday, the Vatican issued its sharpest message to Israel since establishing relations in 1994. The Vatican stated that by allowing the building of a mosque on a disputed site near the basilica, the government is fomenting tension between Christians and Muslims.

The same day, the cornerstone-laying ceremony for the mosque took place.

"We were obliged to close our churches to make our voice heard," Latin Patriarch Michel Sabbah said in Jerusalem. "If the Israeli government had been interested in the good of [Nazareth] and its people, it would have stopped this ordeal. It should have intervened two years ago."

The Vatican's message came in the form of a statement by Joaquin Navarro-Valls, director of the Vatican Press Office.

"I believe that political authorities in this case have a great responsibility, because instead of favoring unity, they create the foundation to foment division," Navarro-Valls said.

Prime Minister Ehud Barak defended the government, saying the special committee set up to deal with the matter had acted with "a great deal of sensitivity and understanding.

"I think we resolved the crisis in a fair and open way, and it is very important to us not to offend any of the religions. We have absolutely no conspiracy with the Muslims against the Christians."

Church leaders said further protests may take place if the matter is not resolved soon. Palestinian leader Yasser Arafat's efforts to defuse the crisis in the city have failed to date.

The area near the basilica had been earmarked by the Nazareth municipality as a plaza for pilgrims coming for the millennium, but Muslim activists occupied the site over a year ago claiming it belonged to the Wakf, the Muslim religious trust, and that a mosque should be built there.

An interministerial committee, headed by Internal Security Minister Shlomo Ben-Ami, decided a mosque could be built on part of the site, as well as on an adjacent site that already held a Muslim shrine.

"Our action is not against Muslims," said the Rev. George Khoury, a Greek Catholic priest from Nazareth, who attended an interreligious gathering at Lake Kinneret on Monday.

Khoury said the protest closure of the churches is intended as a message to the government, which he said has not understood the importance of the Christian community.

He added that there is no reason churches and mosques cannot exist side by side. There are only some 90 feet between the historic Church of the Nativity in Bethlehem and the mosque, but the Nazareth mosque had been agreed upon by use of force, he said.

Among the closed sites: the Church of the Nativity, considered the birthplace of Jesus; Jerusalem's Church of the Holy Sepulcher, honored as the site of the tomb of Jesus; and the Nazareth Basilica, which Christians believe is where an angel appeared to Mary.

The Christian leaders apparently rejected a plea from the Palestinian Authority asking that as the protest was against Israel, churches in the Palestinian self-rule areas should remain open.

Sheik Abdul Salam Mansour, a Muslim cleric who also attended the Lake Kinneret conference, said Muslim leaders respect the Israeli government's decision. Although the Nazareth District Court ruled that the area in question belonged to the Israeli government and not the Wakf, he asserted that it is Wakf land.