The BBC recently invited me to a panel discussion on the subject "Is Israel Losing Its Soul?" Cynics can be forgiven for noting a certain improvement in the network's attitude toward Israel, by assuming that Israel still has a soul to lose. Unfortunately, I couldn't make the debate, but if I had participated, here's what I would have said:

"Before dissecting the flawed soul of Israel, I'd suggest we discuss the collective soul of Palestine and, by extension, of the Arab world. Israel, after all, was ready to become the first country in history to voluntarily withdraw from its historic heartland and share sovereignty over its capital city. By contrast, Palestinian society has become prisoner of a death cult that celebrates mass murderers as religious martyrs and educational role models. And, unlike the Israeli soul, which is torn over the price we must pay for self-preservation, the Palestinian soul shows few signs of remorse for its culture of national suicide."

No country's soul has been more severely tested than Israel's. Only Israel has faced terrorism from its creation; only Israel confronts an enemy that considers its existence an offense.

Only Israel confronts an enemy that considers its existence an offense.

The vitality of our soul is tested daily in the intensity of our dilemmas. How do we reduce humiliation at the roadblocks while controlling an enemy that uses ambulances to smuggle explosives belts? Which is the more moral decision -- to kill Hamas leaders along with innocent Palestinians or allow mass murderers to escape and risk the lives of innocent Israelis? How do we maintain basic human sympathy for Palestinian suffering without encouraging Palestinian self-pity and avoidance of blame for creating this disaster?

Not all our answers to those and other challenges have been wise. Sometimes we yield to immoral power, sometimes to immoral weakness.

Still, it is our struggle for balance between security and morality that is a sign of the vitality of the Israeli soul. In the global war against terror, Israel is humanity's laboratory for testing the limits of a democracy under permanent siege.

The value of that experiment is ignored by Israel's foreign critics. But not only by them. Our own ideologues of left and right demand a simplistic resolution of the tension between security and morality. Dogmatic leftists -- like the Israeli human rights activists who petitioned the international court against the security fence -- perceive the Palestinians as a benign minority merely seeking freedom, rather than as part of a regional majority that wants to uproot us and denies the legitimacy of our being. For their part, dogmatic rightists despise the democratic norms we've imposed on ourselves and want nothing more than to be freed of those constraints.

In measuring the state of our soul in the war against terrorism, I would suggest two criteria. The first is our ability to withstand terrorist blackmail. That is not only a tactical but a moral necessity. If Israel surrenders -- for example, if we negotiate substantive political issues under terrorist fire -- then terrorists everywhere will be encouraged to persist. If Israeli society can be broken, terrorists will realize, then any society can be broken.

The fact that we haven't surrendered to a terrorist assault intended to atomize Israeli society by frightening us away from our public spaces is Israel's gift to a terrorized world. Arguably no other Western nation could have withstood the sustained atrocity assault we've endured over the last three years and still remain basically intact.

Burg ends his eulogy for Israel by appealing to Israel's friends abroad to help us once again become a light to the nations. But that's precisely what we've been during these last three years.

In a recent article decrying what he called a "failed Israeli society," former Knesset speaker Avraham Burg wrote, "Israel, having ceased to care about the children of the Palestinians, should not be surprised when they come washed in hatred and blow themselves up in the centers of Israeli escapism." In fact, our ability to maintain those "centers of Israeli escapism" and refuse to be intimidated is proof of our moral health. Burg ends his eulogy for Israel by appealing to Israel's friends abroad to help us once again become a light to the nations. But that's precisely what we've been during these last three years, even if much of the West and some on the Israeli left don't realize it.

When we weigh our tactics in the war against terrorism, the psychological impact on terrorists should be a central consideration of our decision-making. By that measure, the prisoner exchange agreement between Israel and Hizbollah, which frees hundreds of terrorists and rewards kidnapping, is immoral. Not surprisingly, Hizbollah leader Nassrallah boasted, just after the exchange was announced, that he would now initiate additional kidnappings of Israelis. President Moshe Katzav's declaration that he was ready to pay "any price" for the return of Ron Arad was likewise an immoral psychological empowerment of terror.

The question of unilateral withdrawal is not just a political but a moral dilemma. Ehud Barak's Lebanon withdrawal, on the eve of final status negotiations with the Palestinians at Camp David in 2000, only encouraged the Palestinians to "learn to speak Lebanese" as some Palestinians put it at the time. The current terrorist war is, to some extent, a result of Barak's flight from Lebanon. These days, a single terrorist attack can produce as many casualties as Israel suffered in a year of combat in Lebanon. That is the price of surrender.

If the Sharon government wants to ensure that unilateral withdrawal from Gaza and parts of Judea and Samaria won't empower terrorism, it needs to balance withdrawal with a tough message to the Arab world. Annexing those parts of the territories still in our possession after withdrawal, for example, would make the point that terrorism exacts a price not only on the society that is targeted but also on the society that encourages it.

The second criterion for judging the state of Israel's soul is the vitality of our democratic institutions and culture. We note with justifiable pride that Israel is the Middle East's only democracy. But that's not just a debating point against Arab propagandists: it also imposes responsibility. As the sole Middle East democracy at a time of radical transition for the region, the responsibility to be an example of democracy under stress is even more acute.

Yes, it is maddening to see Mustafa Dirani, who sold Ron Arad to the Iranians, appear in an Israeli court to sue for six million shekels in compensation for abuse he claimed he endured under interrogation. But decisively resolving the unbearable tension inherent in our war against terror, in favor of either an absolutist human rights agenda or an absolutist security agenda, would destroy the essence of Israel's soul, which is the ability to sustain paradox.

This article originally appeared in the Jerusalem Post.