Try to imagine, in today’s Berlin, a group of skinheads entering a pharmacy and shouting at a young Jewish saleswoman: “Get out of here, we don’t want Jewish workers, your loyalty is with Israel,” then threatening the owner: “Fire her, or we’ll make sure nobody buys from your pharmacy.”Imagine young Jewish students in Chicago, having to move out of the city since no one was willing to rent them an apartment: “The residents will not like having Jewish neighbors.”Imagine the foreign minister of France asking French men and women not to buy at Jewish stores.Imagine Jewish children being beaten up in New York by hooligans chanting “dirty Jews.”Imagine the Jewish Ghetto in Rome, when at night a group of hoodlums march, chanting “Death to the Jews,” and leaving behind “price tag” graffiti.Imagine a Jewish computer engineer not being able to find a job in London after saying in his job interview that his name is Morris Cohen.Well, these racist incidents did not happen in Berlin, Paris, Rome, New York or London. They happened here in Israel, in the last month alone, in Tel Aviv, Haifa, Tira, Beersheba, etc – just replace “Jew” with “Arab.”Yes, we did deteriorate so much that our democracy is in danger. Israel is in danger. Hooligans and racists exist all over the world.The question is how much social resonance they receive for their racist views and actions and what is the government doing about it. Sadly, racist views against Arabs have a following among many Israeli youth. For many, their Hebrew language has been poisoned with pejorative vocabulary. More dangerously, as we have witnessed lately, the government did little more than mumbling half heartedly that “we are in need of unity at this moment, and that extremist views were not warranted.” This is not the denunciation of racism one should expect from the Jewish state.Ultra-nationalism and fascism historically win when the moderate forces are weak and silent. We know it from our tragedy-ridden history, and therefore we are not allowed to turn from victim into victimizer.Our current leadership did not heed this lesson. At the outbreak of these racist incidents and rhetoric, the prime minister did not stand up to condemn them strongly enough or call for necessary legal measures against racist incitement. He only called to calm extremist rhetoric at the time of crisis. It was a low point in his altogether inglorious tenure as prime minister. He who calls on the Arabs to recognize the Jewish state should do more to confront such Jewish racist behavior.Others in government served as inspiration to the racists. Yisrael Beytenu’s Avigdor Liberman called for a boycott of Arab stores, reminiscent of dark chapters in our history. Bayit Yehudi’s Naftali Bennett, with his flamboyant demagoguery against “the treason of Arabs and the Left,” is the informal leader of the troops of racism, the Jewish brotherhood.These outbursts of racism and extremism during the “50 Days War” are, in the long run, far more dangerous to Israel than Hamas could ever be.We need to understand where this hate, racism and quasi-fascism is actually coming from, before we can heal ourselves. Israel suffers from a severe case of national schizophrenia.On one side we are a regional superpower with one of the most powerful armies in the world and its strategic deterrence capacity, as well as a technological powerhouse with one of the world’s leading hi-tech industries. On the other side, given our past, we feel a deep sense of insecurity and anxiety.Every terrorist group is equated with Nazis, and every single terror attack on Israel is a threat to our very survival.This dualism makes it difficult, if not impossible, to make the right choice for the use of our power. As we amplify dangers, we seem weaker and more anxious to our own selves. This strangles our ability to translate power into deterrence, coalition building and diplomatic gains. We abuse our own power.Paradoxically, throughout history the Jewish people knew how to contend with weakness, while being a dispersed minority. We seem to have greater difficulties dealing with Jewish strength.This, given our past, is not surprising, is even understandable. We see ourselves historically as perpetual victims, but we transfer the past into the future. “From one generation to another”...Israel was born to change this, in order to cease being dependent, to cease being the victim, to get out of the ghetto. We did, and we did not. We did not get the ghetto out of us, we thrive on being a victim, from Golda Meir’s chant of “The whole world against us” to Binyamin Netanyahu’s “We will always stand alone.”There may be a common thread between historical enemies and today’s haters, but Israel itself is the dividing line. As long as we can maintain our strong Jewish and democratic nature and values, it can permit us a new place in the family of nations, so that we will be able to not only stand up to our enemies but also to build new and necessary partnerships.By using only the sword, and by expressing hate and racism to our neighbors, we play into the hands of our enemies and the self-defeating image of the perpetual victim.Today’s Israel needs to heal itself from its post-traumatic state of mind. We have to act out of a position of strength, not out of hubris or anxiety.The test of independence and sovereignty is not, as our leaders assume, merely to activate our army for security, but to form a strategy of deterrence and international diplomacy in order to attain national goals. This cannot be based on the utter mistrust that our government has toward potential partners in the region and toward our friends in the international community, even the United States.Coalition building must be based on the ability to maintain a dialogue of mutual interests and growing trust. Israel must cure itself of the perception that everyone in the world who does not endorse our policies on settlements is an anti-Semite, or that everyone in the region who will not recognize Israel as a Jewish state is a terrorist.Normalizing Israel means having a more lucid view of the non-Jewish world; people, societies and countries can differ on policies, can criticize each other; not everything is based on fundamental disdain or rejection.The art of statesmanship and diplomacy is based on the ability to forge common interests, for self-interest.That is our challenge. It cannot be achieved by a government and its supporting constituency who see themselves only as victims of the world; who see our strategic American partners as enemies; and who see in all Arabs, a bunch of anti-Semitic terrorists out to destroy us.This cannot be achieved by a government and its constituency that preaches racist attitudes toward the Arab minority and neighborhood.It’s time for Israel to grow up and normalize – to be the mature, wise, creative and moral nation state we can be. It’s time to have the courage to make peace with a Palestinian state, and forge new alliances in the region and the world.It is therefore of great urgency to combat Jewish racism and deal with the Arab world on the basis of our Declaration of Independence, in favor of equal rights for the Arab minority, and to extend an honest olive branch to our neighbors – a peace compromise made out of strength.The Declaration of Independence is our birth certificate, our Bill of Rights, and we are obliged to live by it.Uri Savir is the honorary chairman of the Peres Center for Peace and founder of YaLa Young Leaders. Barbara Hurwitz edited this column.