As the ceasefire came into operation last Monday, it was generally agreed that over 1,100 Lebanese had lost their lives compared with 156 Israelis. More bodies are, however, still being pulled from obliterated buildings. Sporadic outbursts of fighting continue.

All last week, a quarter of a million displaced Israelis began returning to their homes and the Israeli government estimates that property damage in Haifa and along its northern border amounted to about 91m, with the assault costing another 120m in military expenditure.

A Katyusha rocket can explode a car . . .but a building will remain relatively intact and most of the displaced Israelis have homes to return to.

Across the border, over a million Lebanese families picked their way through the rubble of highways and roads, avoiding the unexploded ordnance of the Israeli invasion as they went back to their villages . . . or what was left of them.

The Lebanese government estimates that Israel's bombardment has caused 1.8bn in damage to 70 bridges, highways, power plants, hospitals, oil storage sites, the international airport, shops and homes.

So why did the returning Israeli soldiers look like a defeated army, while the Hezbollah militia remain exultant?

When Israeli prime minister Ehud Olmert declared war, he promised that in south Lebanon, "we will insist on expulsion of Hezbollah from the area".

Clearly, after 34 days of aerial bombardment and intensive battles by a full ground-force invasion, he has failed.

Hezbollah leader Hassan Nasrallah proclaimed "an historic victory" and his backers, Syrian president Bashar Assad and Iranian president Mahmud Ahmadinejad, both exulted over Israel's obvious inability to inflict a crushing defeat.

Israel, in the eyes of the Arab world, is no longer the invincible nation that demolished its opponents in the Six Day War of 1967, winning control of Gaza, the Sinai peninsula, the West Bank and the Golan Heights.

President George Bush may have regarded the 34-day conflict as an opportunity to crush Hezbollah and as a way of putting manners on Iran and Syria . . . but neither country has been touched.

Israel did not capture the Hezbollah leader as it loudly proclaimed it would.

Little wonder, as he spent most of the war in Syria.

Nor did it succeed in achieving the return of the soldiers kidnapped by Hezbollah, the action which started the war in the first place.

So is Ehud Olmert in trouble then?

The Israelis are a people used to quick and crushing victories. Olmert faces a major political crisis in the aftermath of the war and has already had to concede the appointment of a committee of inquiry to examine the state of readiness of the Israeli army before and during the assault.

There are reports that it was underfunded, ill-prepared and that its intelligence about the strength and capability of Hezbollah was poor.

Opinion polls have shown a dramatic drop in Olmert's popularity. The Yediot Ahronoth newspaper shows support has slumped to 43%, while some 53% want defence minister Amir Peretz to resign.

Some 70% believe Israel should not have signed the ceasefire terms and over two thirds support assassinating Sheikh Hassan Nasrallah, even if it means restarting the war.

If there were a general election tomorrow, right-wing opposition leader and former prime minster Binyamin Netanyahu could win.

But surely, with so much destruction in south Lebanon, there must be some opposition to Hezbollah for provoking the predictable Israeli firepower on such a huge scale?

Of course, many Lebanese people oppose Hezbollah, but among the Shia refugees moving back to Beirut and to their villages last week there was more faith in the ability of Sheikh Nasrallah and his organisation to reinstate their homes and lives . . .

and protect them from another Israeli attack . . . than there was in either the Lebanese government or the proposed peacekeeping force.

Nasrallah promised he would rebuild all the 700,000 homes in the ground zero that is now southern Beirut. He appeared on television offering to pay all these families' rents for the next year and make up for their lost income.

His party officials have also been touring Beirut's suburbs and visiting south Lebanese villages drawing up lists of who needs temporary housing, schools and spending money.

By contrast, the Lebanese government, impotent against the power of Hezbollah, has been virtually invisible. Pictures of Nasrallah are everywhere and when rumours that the Hezbollah leader was to attend a rally in Beirut filtered out, the numbers in the area doubled within minutes.

"Yes, we paid a high price with all this destruction, " said Jamil Jaml, 75, of his village in Aita al-Shaab. "But it was worth the price. We didn't attack Israel; Israel and Bush attacked us."

Olmert says the ceasefire will fundamentally change the face of the Middle East and end the Hezbollah "state within a state" in Lebanon. But is this really likely?

Hezbollah has never been stronger and, even though it used up some 12,000 rockets during hostilities, these can easily be replenished by Syria which, with Iran, is triumphant at Hezbollah's resistance.

Olmert has said peace negotiations must begin with Syria, but even moderate opinion within Israel is opposed to this because the price must be relinquishing the Golan Heights.

Given President Assad's vituperative attack on Israel last week the sort of trust needed even to start preliminary talks is non-existent.

The only consolation for Israel is that, within the Arab world, more moderate countries such as Egypt, Saudi Arabia and Jordan are paying more attention to the militancy of both Syria and Iran.

The sad reality is that already, even before the peacekeepers move in, both Israel and Hezbollah, backed by Syria and Iran, are preparing for another war.