In 1967, with Egypt cutting off a key Israeli port and massing troops along Israel's southern border, Syria shelling the northern border and both nations calling for war, Israel fought back. Israel won the West Bank and Gaza in that war and at the time indicated that it was eager to negotiate a peace settlement to give them back. The Arab leaders meeting at the time refused, charging "no peace with Israel, no negotiations with Israel."

Since the Six-Day war, Arab efforts have been focused on regaining the territories. Arafat's current efforts seem to indicate that a state would be enough to settle the question of peace in the region. Still Palestinian rhetoric confirms that the territories are a mere step toward the underlying goal--the entire state of Israel.

THE PLO's covenant and its record of terror are key stumbling blocks to believing that Arafat is committed to a peaceful settlement. The convenant is incompatible with the creation of a separate Palestinian state in the occupied territories, since it says, "Palestine with its boundaries that existed at the time of the British Mandate is an indivisible territorial unit." The covenant asserts "armed struggle is the only way to liberate Palestine."

If Arafat is to be believed, the covenant must be renounced.

The PLO has always been and continues as a terrorist organization. From the PLO's 1964 inception until Israel attempted to pushed it out of Lebanon in 1982, PLO terrorist attacks have killed 689 Israelis and wounded 3799. Civilians have been targeted in incidents such as the massacre of Israeli athletes in the 1972 Munich Olympics. The PLO has financed and trained international terrorists, from the Japanese Red Army to Nicaraguan Sandinistas to Idi Amin's Ugandan henchmen. Arafat's recent overtures cannot camoflauge the blood on his hands.

Although Arafat has "renounced" terrorism, he holds fast to his support for violence. When Bethlehem mayor Elias Freij proposed a truce in the intifadah to provide an opportunity for negotiation, Arafat countered with this threat: "Any Palestinian who proposes an end to the intifadah exposes himself to the bullets of his own people and endangers his life. The PLO will know how to deal with him." So much for words of peace.

ARAFAT is currently courting the backing of Western powers for his message, but support for him within the Palestinian camp remains unclear. Key Palestinian factions have indicated their disapproval for Arafat's initiative. A joint statement by the heads of the Popular Front for the Liberation of Palestine, George Habash, and the Democratic Front for the Liberation of Palestine, Naif Hawatmeh, "Arafat's Geneva statements do not commit the PLO to anything and they do not represent official policy." Arafat's statements also "contradicted the resolutions adopted by the PNC [the Palestine National Council]."

Terrorist incursions into Israel from Lebanon and Syria have increased since Arafat's declaration, as dissidents indicate their opposition.

CLEARLY, Israel cannot trust the other side. But there can be no question that Israel must make peace with it.

A war is being waged in the territories, away from the centers of Israel's population, yet the principles behind the bullets and stones cut at the very existence of the state. The army's "get tough" policy strikes at Israel's grounding in religious values and commitment to peace. Throughout history, Jews strove not just to survive, but to survive without sacrificing principle.

Now Israeli soldiers are killing teenagers. More than 300 Palestinians have died so far. Arabs hurl stones, burn tires and toss homemade bombs. Jews beat, arrest and shoot.

The Israeli Defence Force has been turned into a police force. Many army generals support the concept of Palestinian self-rule, because they are intimately aware of what policing the territories is doing to their troops. When the prime minister visited forces on duty in the West Bank earlier this month, a paratrooper told him, "I have to act brutally toward people free of crime, too. I feel humiliated by this behavior."

Palestinian schools in the territories were closed indefinitely last week. Residents who depend on jobs in Israel and shopkeepers strike for the intifadah. Palestinian anger and frustration justifiably grows.

Last month a life-and-death moral crisis in Jerusalem showed the dehumanizing gulf that has formed between the two sides. An elderly Arab man lay dying from an Israeli bullet. In a hospital across town, an elderly Jewish man lay dying for lack of a functional heart. A transplant could have saved his life. The Jewish family asked, the Arab family refused. Both men died.

A Palestinian state would not solve many key problems, such as discrimination against Palestinians in Israel proper. And it may place Israel's security in a more precarious position depending on how the following issues are resolved: Would the Palestinian state have an army? Which side would get Jerusalem? Would a corridor of a Palestinian state be created to link the Gaza Strip to the West Bank, as Arafat demands?

As the mayor of Bethlehem said in his pre-Christmas truce proposal, "Jews and Arabs are destined to live in this country together forever. Let's follow the wisdom of Solomon the Great. Israel is to have its part and the Palestinians to have their part of the Holyland."

It is unlikely that a new state will improve Palestinian-Israeli relations and, based on most rhetoric of the Palestinian liberation movement, it would probably endanger them. But there is no alternative.