Jubilation, with some jitters, as Israel turns 60

JERUSALEM (Reuters) - Fireworks and military fanfare launched Israel's 60th anniversary celebrations on Wednesday, with leaders of a Jewish state that has known no peace vowing to pursue their quest for accommodation with old enemies.

Boasting economic success and democratic credentials rare for the Middle East, Israel only recently revived coexistence talks with the Palestinians -- who, like fellow Arabs, consider its founding in a 1948 war an injustice that demands redress.

"Our conflict has been long indeed," Prime Minister Ehud Olmert said in a speech honoring Israel's fallen soldiers before Independence Day events began at nightfall. "However, it is peace, not war, that we aspire to and crave."

The diplomatic drive will be crowned in a visit next week by its chief sponsor, U.S. President George W. Bush, but has been overshadowed by mutual recrimination and a police investigation into Olmert's affairs that has raised questions over his future.

Israel, whose advanced military is widely assumed to include the region's only atomic arsenal, is also jittery about arch-foe Iran's nuclear program and support for Islamist guerrillas in neighboring Lebanon and the Gaza Strip.

There are domestic concerns, too.

Israelis are divided over whether to continue occupying land captured in a 1967 war and where Palestinians seek a state. Secular and religious Jews vie to define Israel's constitution. Minority Arabs complain of deep-set discrimination, and the economically disadvantaged of growing government neglect.

But parliament speaker Dalia Itzik, addressing top state officials and foreign dignitaries gathered at a Jerusalem parade ground named after 19th-century Zionist visionary Theodor Herzl, called for Israelis to set worries aside and savor the day.

"Israel is an extraordinary success story," she said. "We can be proud of almost all our handiwork in this national home -- almost everything. We turned a dream into reality."

Founded partly on the basis of Jewish claims to biblical land and partly as a haven for survivors of European persecution that culminated in the Nazi Holocaust, Israel declared independence on May 14, 1948, hours before a U.N. mandate in then British-ruled Palestine expired.

Israelis celebrate the day according to the Jewish calendar.

For Palestinians, whose leaders rejected a U.N. proposal to divide the territory into Jewish and Arab states, May 15 is marked as a "Nakba" or "catastrophe", in memory of hundreds of thousands of compatriots dispossessed in the war.

(Editing by Mary Gabriel)