OCCUPIED JERUSALEM – Israel on Thursday celebrated its 60th anniversary with displays of military might and parties as Palestinians marked the plight of hundreds of thousands who lost their land to the Jewish state.

Military air shows were among the crowd-pleasers with warplanes going through their paces in sunny skies even as a dark cloud hung over the political future of Prime Minister Ehud Olmert, who is under a corruption investigation.

Crowds also thronged military bases which opened their gates to the public to show off some of the mighty arsenal used by an army well tested in six decades of conflicts.

Security forces were on high alert amid concerns that Palestinian militants could use the celebrations to launch attacks, and the authorities imposed a security lockdown on the occupied West Bank.

Palestinian Prime Minister Salam Fayyad was among the dignitaries who attended the inauguration of a tented "camp of return" in the West Bank town of Ramallah.

The exhibit features displays of photographs and documents dating back to the 1948 creation of Israel which turned hundreds of thousands of people into refugees.

Sixty years after its creation in the aftermath of the Nazi Holocaust, Israel remains mired in a seemingly intractable conflict with neighbors still technically at war and with the Palestinians still struggling for their own state.

As the Israeli party was in full swing on Thursday, the political establishment braced for a potential shakeup amid uncertainty over Olmert’s political future after he was questioned by the anti-fraud squad last Friday.

Olmert, already the subject of three police inquiries into allegations of fraudulent property transactions and abuse of power, has denied any wrongdoing and insisted that he will continue his duties as premier.

The potential scandal has cast a shadow over this year’s Independence Day events, intended to showcase Israel’s achievements over the years.

The country enjoys a stable economy on a par with most Western states, a powerful military, a booming high-tech sector and what is thought to be the region’s sole if undisclosed nuclear arsenal.

Israel also enjoys strong support from the United States, whose President George W. Bush will join the birthday celebrations next week.

Long-moribund peace talks with the Palestinians were revived at a U.S.-hosted conference in November but have made little progress since then, and to this day neither Israel’s capital nor its borders are universally recognized.

(AFP)