''Israel now confronts the most serious crisis of its history,'' a leading French journalist wrote last week, expressing a view widely held around the world. Is it true? And what is the nature of the crisis?

It is a many-layered problem. At its most superficial level, the problem is continuing violence that has more and more taken on the character of a popular rebellion. But deeper down, it is a problem that involves the future of not only the Palestinians but of Israel itself.

The violence is a blatant, head-on challenge to Israel's authority in the territories. It cannot be ignored and it confronts the government of Israel with an ultimate choice: either reestablish order or accept the loss of the territories and the collapse of policy -- and the collapse of hopes for more secure borders and peace.

Each alternative is more dangerous than it initially appears. It is extremely difficult to reestablish order when there is a large supply of young Palestinians ready to risk death. Moreover, the use of force to put down the challenge is extremely costly to Israel's international reputation.

The persistent violence of Palestinians has put Israel in a double bind, the kind described by Carlos Marighella, Brazilian tactician of revolution, in his ''Mini Manual of the Urban Guerrilla.'' According to Marighella, a small band of violent men can create a situation in which ''the government has no alternative except to intensify repression. The police roundups, house searches, arrests of innocent people and of suspects, closing off streets, make life in the city unbearable.''

In the wake of these repressive measures, Marighella continues, ''the general sentiment is that the government is unjust, incapable of solving problems, and resorts purely and simply to the physical liquidation of its opponents.'' Eventually, as repression grows, ''the political situation in the country is transformed into a military situation in which the militarists appear more and more to be the ones responsible for errors and violence, while the problems in the lives of the people become truly catastrophic.''

Marighella might well have been describing life today in Gaza and the West Bank. Israel possesses the necessary force to quell the uprisings, but could not use it against a civilian population. In fact, the force already used by Israel has brought harsh condemnation. If those engaged in violence are rounded up and deported, the U.N. Security Council describes the act as a violation of the Fourth Geneva Convention. If those engaged in violence are shot or beaten, Israelis and friends of Israel around the world are deeply repelled.

But not everyone is equally repelled by violence.

''You freed us from the Latin age of political logic and taught us to be crazy, too,'' Arab poet Nizar Kabani wrote of the students of Gaza. ''Teach us,'' he implored the ''crazy'' young Palestinians who risk their lives daily against Israeli occupation authorities. ''Teach us to become men.''

Nizar Kabani is not alone in his pride. Many older Palestinians in Gaza and the West Bank are proud of the young men who take to the streets day after day to hurl stones, break windows, start fires and risk death. The uncalculating courage of these would-be martyrs has sparked wide admiration in the Arab world.

A preference for violence over ''political logic'' is hardly new to this region, where religious, ethnic and political differences lead not to pluralism but to assassination, anarchy and war. In this region violence is regularly a vehicle for changing regimes, and murder frequently triggers succession. There is no ruler in the region who has not been targeted by an assassin and no minority that has not been oppressed.

Often in the politics of this region intransigence is mistaken for courage and compromise for cowardice.

This is also the region where governments demonstrate their commitment to each other by refusing to accept the existence of Israel and by punishing deviation from the policy of ''no peace with the Zionist entity.''

These facts give a special edge to the demand that Israel ''compromise'' its position with those who seek its annihilation. Only this week, ''moderate'' leader Yasser Arafat called Israel ''our country,'' reaffirming his view that Israel is Palestine and that the PLO is engaged in a war to win it.

Prospects for diplomatic settlement are no better than for a cessation of violence. In a recent interview with L'Express magazine, Jordanian King Hussein rejected any and all interim arrangements for autonomy on the West Bank or Gaza and reiterated that the only acceptable step in a peace project is an international conference consisting of permanent members of the Security Council and the countries of the region.

No sooner had George Shultz suggested a U.S. initiative than Syria's Hafez Assad rejected it out of hand. And now Arab countries, including Egypt, have publicly rejected the Camp David Accords as a basis for negotiation. This latest hardening of the Arab position makes capitulation by Israel a precondition to negotiation.

What then can Israel do? In this double bind, the government of Israel is left with those policies that can be adopted unilaterally. Israel can and should:

1. End beatings because they are brutal, brutalizing and unbearable to less violent political cultures. Arrest, imprisonment, deportation are surely preferable to breaking bones and shooting stone-throwers -- even very violent stone-throwers.

2. Eliminate discriminatory economic regulations and open up market outlets for the agricultural and industrial products of Palestinian Arabs.

3. Maximize the autonomy of Palestinian areas on the model that Mayor Teddy Kollek has pioneered in Jerusalem.

4. Cultivate maximum respect for the economic, social and human rights of Palestinians in the territories.

None of this comprises the ''complete solution'' demanded by Israel's adversaries, but it's better than the alternatives.