Our latest Lebanese War has turned our entire region upside down. We in Israel are, of course, preparing for the next war, the War of the Jews. The long knives have already been sharpened. Some of the shriller correspondents in the daily press share the view of the propagandists across the border that Hizbullah achieved a resounding victory, and they loudly proclaim that the government, therefore, must be sent packing. To those bemoaning our terrible defeat, I suggest they read an article in The Times entitled "If this was a defeat, the Israelis must be praying for a lot more of them." The article analyzes the war, and ends with the following words: "If this is a 'defeat,' then Israel can afford many similar outcomes." There certainly was no outright victory - or defeat - in this war. We won on points on the battlefield, and Hizbullah won handsomely in the propaganda war, and perception being all-important, many people, including in Israel, are convinced that Israel suffered a terrible defeat. There can be no doubt that many mistakes were made. A newly appointed government led by two inexperienced leaders had a war suddenly thrust upon it. Yet their decision to pick up the gauntlet was a correct one. If they had hesitated or procrastinated then Hizbullah could have justly proclaimed a real victory. The premier and his defense minister relied, correctly, on their top adviser in military affairs, the chief of staff, just as previous prime ministers and ministers of defense have done in similar circumstances. To my mind, both Ehud Olmert and Amir Peretz acted as they should have done, except, of course, for the silly bravado of their opening declarations, which were completely unrealistic and made the public believe that the war would be a walk-over. There was, however, a great deal at fault in the army, and in the advice and assessments given to the government, and for that, neither the prime minister nor the new defense minister was to blame. If at all, accusing fingers should be pointed at the previous government, and in particular at the previous defense minister and former chief of staff who allowed the army to deteriorate and who put the Hizbullah danger on the back burner. In truth, it was not entirely their fault. The army had become principally an army of occupation. Its duties could almost be likened to those of a gendarmerie, though this could hardly be said about the latest fighting in the Gaza Strip. There can be no doubt that the years of dealing with recalcitrant Palestinians have taken their toll, including on the army. The political fallout of the Lebanese War has, however, much wider connotations than on our own particular brand of infighting. We are not the only ones concerned with Hizbullah. The Iranian-Syrian-Hizbullah axis is seen as a danger for the Sunni regimes of our region. Their leaders have realized that, in the words of The Times article, "Jews constitute no threat to mainstream Sunni Islam. The Shi'ite challenge is another matter." Iran, not Israel, is the danger, and Hizbullah are its shock troops. The sparring has already begun. Syrian President Bashar Assad's speech on Wednesday raised a howl of fury and protest throughout the Sunni countries. Bashar, carried away by his own eloquence, called the Arab leaders who had criticized the kidnapping of our soldiers "half men." For an Arab head of state to name Saudi, Egyptian and Jordanian leaders "half men" is really stretching diplomatic niceties to the extreme. The Sunni politicians in Lebanon, grouped round the son of the assassinated former Premier Rafik Hariri, declared that Bashar's speech was "an act of war" against them, a declaration certainly not lost on their backers in Saudi Arabia and Egypt. Tensions are at boiling point in the Lebanon in the aftermath of the fighting. The Sunnis, Christians and Druze increasingly feel that they have to go on the offensive and cut Hizbullah down to size, or else risk losing the westernized, liberal, laissez faire Lebanon forever. "Do we want a Hong Kong or a Mogadishu, a Riviera or a bunker?" was the way one Lebanese Sunni put it. Significantly, a leading Sunni politician observed, "The only way to prevent a nightmare is to go for a comprehensive peace process." A shrewd Lebanese politician with whom I have been speaking in the past few days is convinced that both Lebanese and Syrians would react favorably to the idea of a "Madrid Two" peace conference sponsored by the US, Europe and Russia. The Syrians are desperately keen to emerge from their international isolation and to repair their faltering economy. Such a peace conference is achievable. It would need American initiative and international backing. For "Madrid One," James Baker knocked the heads together of our region's leaders to such an extent that both Hafez Assad and Yitzhak Shamir, neither of whom wanted the conference, cane running to Madrid. Could the Americans pull it off again? My guess is that this time it would be much easier. It could be a coup for American policy in the Middle East. It could be a lifesaver for Lebanon. And for us, and that is what interests us the most, it could herald a whole new era in our checkered history with our neighbors. We should go for it, and do our utmost to persuade the Americans and others that "Madrid Two" could be the ideal sequence to that ugly war in the North. The writer is a former director-general of the Foreign Ministry.