ISRAEL IS IN THE DEPTHS of the gravest crisis in its twenty-six year history as an independent state. The Palestine Liberation Organization has been granted official recognition by both Arab governments at the Rabat summit and by the General Assembly of the United Nations, where Yasser Arafat's call for Israel's dismantlement was greeted with a standing ovation. Terrorist incursions into Israel have taken the lives of 57 people so far this year, and despite stringent security measures and brutal retaliatory raids into Lebanon, the attacks have not been thwarted.

A fragile peace does exist on the Syrian and Egyptian fronts, but the threat of war is ever present, a war which Israel simply cannot afford, in terms of lives, money, or morale. In addition, a spiralling inflation rate, presently 42 percent, a poor balance of payments deficit of roughly $3.5 billion, and dwindling foreign donations (due to a world recession) have plunged the country into an economic depression. And to increase discontent, sever and unpopular austerity measures have been imposed.

Policy questions within Israel, such as whether settlers should be allowed in the occupied territories, have created serious tensions and there have even been incidents of physical combat between soldiers and civilians, which would previously have been considered impossible by most Israelis. In short, for the first time the entire situation of the country is so precarious that many observers, particularly outside Israel, are pessimistic about the state's chances for survival.

And although within Israel there is virtually no public expression of doubt, visitors report that it often seems as though the entire nation is bracing itself for a final siege.

Within this turmoil, as might well be expected, the political divisions in the country are deeper than ever before. Premier Yitzhak Rabin's government is under fire from a small but articulate dovish-left and a powerful right. And the government, considered the most dovish in Israel's history, also fails to enjoy the clear support of some of the most powerful figures within Rabin's own Labor Party, notably Moshe Dayan and Abba Eban.

Two representatives of opposition factions have been traveling in the United States during the last week. Shulamit Aloni is a leading leftist in Israeli politics; she founded the Citizens Rights Party as an offshot of Labor, and calls for more attention to societal problems such as prejudice against Oriental Jews and Arabs, lack of consumer protection, and expanding, depersonalized bureaucracy. Aloni served as a Minister in Rabin's cabinet until last month, when she resigned in protest over his decision to include the rightist National Religious Party in the governing coalition. She has, however, retained her seat in the Knesset. Although Citizens Rights has a very small following, Alomi is regarded as an important leftist, and by Israeli standards even a radical voice in national politics.

Ehud Olmert is the youngest members of the Knesset at 29. As a representative of Likud, the right-wing opposition, he maintains a hard line on any concessions by Israel. Olmert sees himself in agreement with Likud chairman Menahem Begin, the former commander of the mandate period terrorist organization, Irgun Zwai Leumi, who has been the symbol of the Israeli right throughout the history of the state.

IN INTERVIEWS WITH the Crimson last week, Olmert and Aloni expressed markedly different positions on key policy questions, differences which reflect the depth of the rift in Israeli political thought.

Aloni advocated a far more conciliatory approach to the Palestinian question. "To say, as Rabin does, that Israel will never negotiate with terrorists, is not good enough. Israel must recognize that there is a Palestinian national entity-that the Palestinians have a right to self-determination. But in the process, the government should affirm that Zionism is the national liberation movement of the Jewish people.

Aloni believes that Israeli recognition of Palestinians' fundamental rights is the primary step toward peace in the Middle East. "With whom we negotiate is of course another crucial question. I think Rabin should be prepared to sit down with anyone who represents the Palestinians, even if this means Arafat and the P.L.O., as long as they recognize Israel's right to exist."

Olmert is far less flexible on the Palestinian question. "The P.L.O. has a clearly stated purpose, articulated in the Palestinian National Covenant, the destruction of Israel. There can be no negotiations with the P.L.O. until the covenant is abolished."

Negotiating or nor negotiating with the P.L.O. is not the real issue. The basic problem, underlying everything, is that the Arabs in general have refused to accept the proposition of a Jewish state in the Middle East. The Rabat decision to call the P.L.O. the legitimate Palestinian representatives was just another slap in the face."

Olmert is extremely dubious about the possibility of Arab governments relaxing their stance and recognizing Israel. "Political positions among the Arabs may have changed, but the basic Arab approach has not. Sadat has never promised to sign a peace treaty, and he has said that a return to the pre-Six Day War boundaries will not even bring about a state of non-belligerency. He is only prepared to negotiate on a military level, not on a political one."

The split between Aloni and Olmert, which indicates the basis of the ideological struggle between left and right in Israel is demonstrated again by their differing views on the Plausibility of a Palestinian state on the West Bank of the Jordan.

Aloni: "A West Bank state, if demilitarized for security reasons, might be a real solution." Olmert: "The West Bank is too limited for a separate independent state. Such a state would by nature be expansionist."

Olmert claims that 95 per cent of Israeli citizens would agree with his general assessment of Israel's foreign policy options. Aloni believes that Israelis can and must come to terms with the Palestinian question if peace is to be achieved. As she says, "I think if Rabin takes a strong stand on recognizing and negotiating with the Palestinians, if he believes in what he is doing, he can take his case to the people and win a majority. But I fear that he will postpone a decision as long as possible."

Olmert senses an emerging rightist swing in Israel and believes that his party stands a strong chance of gaining strength in any new elections. He says that national dissatisfaction with the Rabin government is manifest, and that Likud's hard line is seen as the only realistic approach to the crisis, by increasingly large numbers of Israelis. Aloni denies the existence of this trend. "There is no rightist swing in Israel-the problem is simply that the government is undefined in its position, and indecision by those in power generally tends to aid the opposition; and in Israel, Likud is the only major opposition force."

The two politicians do share a pessimistic attitude toward the potential effects of the Kissinger negotiations. Aloni is extremely doubtful about Kissinger's chances of achieving a breakthrough in the Middle East. "The Rabin government gives Kissinger more credit than the average person. We are all aware that he won the Nobel Prize for Peace, yet there is no peace in Vietnam."

Olmert is equally dubious about Kissinger's role. "His goals are what is in the global interests of the United States. His objective is not to bring a permanent peace, but to avoid any possible escalation which may lead to nuclear war. His technique is to hold all the keys in his hands, a method which creates ambiguities and increases rather than relaxes tension."

Olmert asserts that Israel does not seek war, but warns that fear of war will not force Israel into one sided concessions. "Israel will go to all lengths to avoid a pre-emptive strike, so long as the lives of our citizens are not endangered." Aloni sees any continuation of the present impasse as dangerous to Israel, and argues that the government should take real risks and explore all avenues which might ease the crisis. "Even if people who say the Arabs are only interested in destroying Israel are 99 per cent right, the 1 per cent chance for peace must not be ignored."

EHUD OLMERT and Shulmit Aloni represent important factions in Israeli political thought, but they are not part of the governing coalition, simply members of parliament. The Rabin government is walking a middle-ground tightrope between their positions. If war doesn't disrupt the entire situation, as well it might, it will probably be possible for Rabin to continue to maintain his stance for some time, while he waits and hopes for a change in world power configurations to work to Israel's advantage. But Rabin knows that Israelis will not allow him to postpone a decision for long. For the psychological trauma of waiting in uncertainty is difficult to endure.