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A year and a half ago, in Davos, Switzerland, Foreign Minister Shimon Peres told his friend Yasser Arafat: "You were a terrorist — today you are an ex-terrorist."

"At first he was surprised," Peres said later, but "then he suddenly understood what I had meant." Last month, Peres again surprised the Palestinian Authority chairman when he declared in the Knesset that Fatah had put down its arms and turned from a terror organization into a political party. Soon after, Peres climbed one additional step in his rehabilitation scheme — he declared from the Knesset podium that the government of Israel had turned Fatah from a terrorist organization into one that now fights terror.

Arafat does not need these bluffs, but Prime Minister Yitzhak Rabin does. Faced with Israeli citizens who slowly grasp the significance of extending the Gaza and Jericho terror cities to terror havens in Judea and Samaria, Rabin needs to whitewash Arafat. "They even get killed fighting terrorism," the premier excitedly remarked, referring to the usual in-fighting among Arab armed gangs in Gaza as well as in the refugee camps in Lebanon.

Reflecting the collective wisdom so typical of a group under stress, government officials declared that after the Kfar Darom suicide bombing, "the coin finally dropped" in Arafat's head, and he started to crack down on terrorists.

Some crackdown. What Arafat really understood was that he has to go through the motions in order to satisfy Rabin. Following the Wadi Kelt murders, Arafat dramatically announced the detention of the Popular Front leadership in Gaza. Three days later, those arrested were released, reporting that they had not been interrogated. Arafat does not intend to disarm Hamas, neither does he plan to extradite to Israel murderers who fled to Gaza.

Arafat has also not stopped inciting his local audiences, supporting the murder of Israelis and the use of suicide attacks. In a June 19 memorial rally for the head censor in Gaza, Arafat declared: "We shall continue this long and difficult jihad [holy war], the road of martyrdom, the road of sacrifice…this hard jihad, the road of those killed, the road of victory, the road of glory, not only for our people but also for our Arab and Islamic nation".

In a meeting of the Women's Union of Palestine four days earlier, Arafat lauded Dalal Mugrabi, who participated in the atrocious attack on a bus on the coastal highway in 1978: "The commander, the star, one of the heroes who carried out the landing on the beach. She was the commander of the group which established the first Palestinian Republic inside a bus…the woman we are proud of and brag about."

Where does the republic, established in a blood-covered bus, lead to? To the continuation of terrorism inside Israel. Arafat's eyes already aim at the Galilee, beyond the PLO flags above his capital, Jerusalem. He clearly expressed this goal in a memorial to Knesset member Tawfik Ziad, held in Gaza. Al Nahar (July 17) described how Arafat commanded the summud (clutching to the land) of the "internal Palestinians," the Arabs residing in Galilee.

Arafat lauded Ziad's tenacity in his struggle for the Palestinian land — again, in Galilee, Israel. On TV Arafat is seen quoting Ziad's poetry: "I shall not forget the things you said, `with my eyelashes I shall pave your road of return.'" He added, "Rest in peace, for we shall complete the journey."

Economics Minister Yossi Beilin recently exposed the real intention of the government when he declared that the goal of the talks with the PLO is not to stop terror, but to attain peace and to stop the occupation.

The government knows, then, that even after "occupation" terminates and "peace" is on earth, terrorist attacks against Israel shall continue. For Arafat, Galilee, too, is occupied territory, and the "external Palestinians" will continue to assist the "internal Palestinians" to liberate it, in the way of the martyrs, until the journey is completed.