Fireworks exploded across Israel as the tiny nation of 4 million people took to the streets this week to celebrate the 40th anniversary of the founding of their country.

Unfortunately, not all of the birthday fireworks were by design.Palestinians in Bethlehem tossed homemade explosives at soldiers to protest the killing of PLO leader Khalil al-Wazir in Tunis last week by an apparent Israeli hit squad.

One day earlier, Israeli troops shot dead a Palestinian and injured at least 13 others during violent clashes with protesters decrying Israel's occupation of the West Bank and Gaza Strip where 1.5 million Palestinians live under Israeli rule. Similar protests and violence have raged for the past five months.

This week's events only serve to underscore the precariousness which has marked the first 40 years of Israel's existence. Still, much has been achieved since that spring day in 1948 when Israel was granted its independence in the midst of hostile Arab neighbors. Whether those Arab neighbors like it or not, Israel is clearly here to stay.

Victory in several major wars have transformed Israel from an ill-armed nation of refugees into the the most powerful military machine in the Middle East, but peace and security remain elusive.

Just as Israel won't go away, neither will the Palestinians a fact Israeli leaders have only recently begun to acknowledge albeit rathergrudgingly.

Israeli Prime Minister Yitzhak Shamir admits a Palestinian problem exists, but remains firmly opposed to creation of a separate state. He rejects comparisons between the Israelis and Palestinians as two peoples each with a desire for their own state.

"It's impossible to compare us with the Palestinians. The Palestinians are part of the Arab people. The Arab people have more than 20 states. The Jewish people have but one . . . ." Shamir says.

"There is a Palestinian problem. There is a problem of Arab residents who live in this land and don't want to live under our rule. That's a problem. An answer must be found . . . ."

He's right. An answer must be found and quickly.

Israel's first 40 years have brought a certain stability, but only at the cost of a siege mentality. Israel's next 40 year must not continue to be a wilderness of violence, suspicion, and hatreds.

This will require that Arabs recognize Israel and provide solid guarantees of its right to exist. And it will require Israel to take steps to resolve the frustrations of the homeless Palestinians.