In an article published ahead of Christmas, Dr. Tawfiq Al-Sayf, a Saudi writer and scholar, urges Muslims not to refrain from wishing their non-Muslim neighbors merry Christmas and a happy new year, and to forgo the custom that has become established among some Muslims, of questioning whether Islam permits them to do so. He states that identifying with the joy and sorrow of others is part of God-given human nature and has nothing to do with religion; hence it does not require any religious ruling. He adds that "joining in the happiness of others is a way to spread cheer and peace in the world," and that those who avoid this do so because they fear external infleucne and therefore seek to isolate themselves.
Tawfiq Al-Sayf (Source: Al-marsd.com)
The following are translated excerpts from the article: 
"The final week of the Christian year is a week of global happiness during which the Christians celebrate Jesus's birth, others celebrate the New Year, and everyone else observes these festivities and shares the joy of this global holiday. I am one of a small minority in the world that has specifically chosen this festive occasion to occupy itself once again with the old debate: Is it permissible [for Muslims] to wish the Christians Merry Christmas and to offer greetings on the rest of their holidays?
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"In the coming week, someone will surely ask you this ancient question. This [refraining from greeting the Christians on Christmas] is a custom that we invented and then started repeating every year, and even more so during the past half century, until one might think that the only issue that occupied our ancestors in those days [at the end of the year] was to repeatedly emphasize the boundaries which separate them from their Christian neighbors.
"I address this issue because I wish to urge my dear readers to forgo this custom, which the political struggles established until it became a religious duty, or appeared to become one.
"Interpersonal relations are not a religious matter at all, but rather a simple moral issue whose place on the scale of values is clear to any intelligent person... We all understand innately that Allah created people so that they would get to know one another and live in coexistence and mutual consideration. When your neighbor is different from you, it is better that you help him and be kind to him, regardless of his race or color. And if he is your enemy, distance yourself from him so as to avoid confrontation with him. This is what common sense dictates and how intelligent people behave.
"Since the matter is clear and obvious, there is no need for a religious ruling. If people on the street [rather than qualified religious scholars] had ruled [that wishing the Christians a happy holiday] was forbidden or obligatory, then this [ruling] would have been artificial and unnecessary. And if [the ruling] contradicted common sense, then reasonable people would have condemned it in the name of Allah, who granted them reason so that they could decide on matters. When I raised this subject in the past, a reader asked me: If this matter is so clear, why is there a consensus among so many of our nation [that it is forbidden to wish the Christians a happy holiday]? I answered him at the time that the advocates of this strange opinion are the minority in the world. Compassion is part of God-given human nature. As a result, one is spontaneously affected when one sees happiness or sorrow on the face of another, even if that person is a stranger. Furthermore, all reasonable people regard gloating over another's misfortune, happiness at the sorrow of others, or displays of sorrow during their celebrations, as a sign of wickedness and poor morals, since this is contrary to human nature and generosity of spirit.
"I have a feeling that the tendency to condemn participation in other people's happy or sad occasions… is part of a broader trend, stemming from the inclination to isolate ourselves for fear of being influenced by the [non-Muslim] majority [in the world].
"Wishing Christians a merry Christmas or wishing people a happy new year is not a matter of religious law and has no connection to any religious ruling which permits [or forbids] it - for it is not a matter that requires the ruling of a jurisprudent. Even if a jurisprudent was asked about this matter and gave a reply, his reply does not count as a fatwa [religious ruling], but rather as a general opinion, which has no validity as an obligation or prohibition.
"Joining in the happiness of others is a way to spread cheer and peace in the world, and so I urge all my dear readers to extend holiday greetings to their non-Muslim acquaintances on the occasion of their holidays and their festive events and to forgo this custom, which is unacceptable and incompatible with the needs of normal human nature."