"Again, the country is polarized," said Amnon Rubinstein as he sat hunched over at a table in the members' dining room of Israel's Parliament.

As has been the case so often in the past, the agent of division referred to by Rubinstein is the burly, domineering former defense minister of Israel, Ariel Sharon.

Sharon left Israel on Nov. 5 and has not been back here since. Yet it is a measure of the force of his personality that even from a distance of 6,000 miles "Arik," the nickname by which he is known, has remained at the center of the Israeli political stage. His libel suit against Time magazine, now in its fifth week of trial in a federal court in New York, fills the daily newspapers and television broadcasts here and is the subject of heated public and private debate.

The debate over the Sharon trial has involved questions about his lengthy absence from the country and his current government post of minister of trade and industry. There have been demands that he resign, or at least take a leave of absence during the trial, and strong objections to the fact that the government is paying his living expenses and those of his wife and bodyguards in New York.

Sharon's attempt to portray his libel suit as a defense not just of his own reputation, but that of the state of Israel and the Jewish people as a whole, has particularly exasperated and outraged his critics. "Nobody appointed him to do that," Rubinstein snapped.

And, as the trial has proceeded toward a climax, there is increasing speculation about the political fallout here, should this both hated and adored public figure win his case against the mighty U.S. news magazine. In that case, Sharon will have succeeded in turning a damning episode that forced his ouster as defense minister into a sort of vindication and political steppingstone, a strategy he apparently has had in mind all along in portraying the trial, in the caustic words of the Jerusalem Post, as "The Jewish People vs. Time."

"He symbolizes the loner, he fights against them all, against the big machine," said Ehud Olmert, a member of parliament from Sharon's party and a defender of the former defense minister. "Sharon is a genius in using this," Olmert said. "He says, 'Here I am against the world. I am alone, but I won because I have guts, and because I am for the state of Israel and the Jewish people.' Jews like that."

Sharon's $50 million libel suit against Time centers on a single paragraph in the magazine's Feb. 21, 1983, cover story on the findings of the Israeli commission that investigated the 1982 massacre of Palestinian refugees in the Sabra and Shatila refugee camps of west Beirut. The commission, headed by Israeli Supreme Court President Yitzhak Kahan, found that Israel bore "indirect responsibility" for the slaughter and called for Sharon's ouster as defense minister.

In the key paragraph, Time reported that a secret appendix to the report contained details of a conversation between Sharon and the family of Bashir Gemayel, the assassinated president-elect of Lebanon, on the day before the massacre. According to the Time story, Sharon "discussed" with the family the need for the Lebanese Phalangist militia, which Gemayel had commanded, to "take revenge" for the assassination.

Sharon has denied that such a conversation ever took place or that it is alluded to in the secret appendix. His assertion about the content of the appendix appears to be almost universally accepted by Israel's political and journalistic establishments, leading to the speculation that he stands a good chance to win the libel suit and reap the domestic political rewards.

Never lacking for critics, Sharon has managed to stay at center stage here in part because of the circumstances surrounding the trial and its length. All Israeli ministers must get full Cabinet approval to travel abroad, and this was dutifully granted to Sharon on Nov. 4.

According to Yossi Beilin, the Cabinet secretary, the understanding at the time was that the trip would be for "about two weeks," and that its purposes were both the libel trial and for Sharon to discuss investments in Israel with New York businessmen.

As the trial has dragged on, there have been charges that Sharon is derelict in administering the industry and trade ministry, which is charged with overseeing the wage and price freeze currently in effect in Israel.

Rubinstein, the communications minister, tried to raise the issue Sunday at a Cabinet meeting, seeking a ruling that Sharon should resign or take a leave of absence until the trial is over. The discussion was ruled out of order by Prime Minister Shimon Peres.

Peres, a senior government official said, has decided that the last thing the new national unity government needs is more internal squabbling over the absent minister of trade and industry. The prime minister, himself recently returned from his second trip abroad since assuming the top government post three months ago, has managed to steer clear of the Sharon controversy.

There is also the question of expenses. Sharon and his entourage are staying at the exclusive Park Lane Hotel in New York and the estimates of the cost of their upkeep have ranged up to $200,000. "Eventually, the bills will come in," said a government official, acknowledging that no one really knows what the cost will be.

Others maintain that Sharon, by resurrecting one of the most painful and traumatic incidents in Israel's history, is damaging the national interest for his own personal and political advantage. In a radio interview this week, Haim Bar-Lev, the minister of police and a longtime adversary of Sharon, noted that several key Israeli government and military officials who were subpoened by lawyers for Time were prohibited from testifying on security grounds.

"Sharon has claimed that the state of Israel is on trial, but he did not bother to ask the country," Bar-Lev said. "In order for the country to protect itself, it has had to prevent people from testifying. The average American takes that to mean that Israel has something to hide; otherwise, why should we care if they testify?"

This week Sharon apparently felt compelled to answer the mounting chorus of criticism. He appeared on an interview program on Israeli television, where he defended his absence from the country and reasserted his claim to be representing the Jewish people in the New York courtroom.

Sharon said he did not know what his expenses would total. "You have to weigh it against the profit of representing the Jewish people against a libel," he said. On his return to Israel, Sharon added, "Everything will be taken care of to the last detail."

Moreover, if he wins the case and a huge settlement, Sharon said he intends to establish a special fund "to fight libel against Jews and against Israel," and to finance a study of the damage done to Israel by "Arab terrorism during the last 100 years."

It was vintage Sharon, in which a direct answer to the question about expenses was evaded in the midst of a strong nationalistic and ethnic appeal.

The issues of Sharon's absence from government and his expenses are likely to fade quickly when the trial is over. What may not fade so rapidly are the old wounds from the Lebanon war that have been reopened and the reminder, personified by Sharon, of the warring camps that make up Israeli society.

In his challenge to Time, Sharon, at least in some cases, appears to have accomplished what once would have seemed impossible: divide even those who share in common a loathing for the former defense minister.

Two such men are David Halevy and Dan Margalit. Halevy, 43, is the Israeli-born Time magazine correspondent whose reporting formed the basis for the key paragraph in the libel suit. Margalit, 46, is a political reporter and columnist for Israel's leading daily newspaper, Haaretz.

They are not close friends, but have known each other for years. Margalit said he always admired "Dudu," Halevy's nickname, and saw him not just as a journalist but a "great fighter" who was among the heros at the Suez Canal front in the desperate days of the 1973 war. But now Margalit thinks "something happened to Dudu."c

"I think he questions whether he is an Israeli anymore," Margalit said in an interview. "Therefore, I cannot identify with Arik Sharon or Dudu Halevy."