Israel celebrated the 60th anniversary of its creation today with fireworks, air force flyovers and street parties, but the atmosphere of heady jubilation was marred by doubts over future security and prospects for peace with the Palestinians.

A security crackdown sealing off the West Bank and Gaza and marches by Palestinians marking the expulsion of some 760,000 inhabitants as part of what they regard as the “Nakba” – the catastrophe – was a stark reminder of the uncertain future of the Jewish State.

Across the country, Israelis held barbecues in backyards and public parks and attended parachute jumps, a Bible quiz, concerts and the inauguration of a footpath around the Sea of Galilee.

The Nasa astronaut Garrett Reisman, the first Jewish crew member on the international space station, sent a greeting from space to the people of Israel.

“Every time the station flies over the state of Israel, I try to find a window, and it never fails to move me when I see the familiar outline of Israel coming toward us from over the horizon,” the American-born astronaut said

But this year’s Independence Day celebrations were tainted by a fresh criminal inquiry into corruption allegations surrounding the Prime Minister, Ehud Olmert, calling his political survival into question amid efforts to forge a peace deal with the Palestinians.

Police and prosecutors were to meet later today to consider repealing a gagging order imposed on the media over the probe.

Meanwhile in the West Bank and Gaza, Palestinians staged events to remind the international community of the disaster that Israel’s creation had unleashed on their people.

Hundreds of thousands were forced to flee their homes during the 1948 war following Israel’s birth, and some 4.5 million Palestinian refugees and their descendants remain scattered across Middle East. Their right of return remains a key sticking point in efforts to find a peaceful solution to the decades-long conflict.

In Bethlehem, some 500 marchers followed a flatbed truck carrying a 10-tonne metal key, meant to symbolise the homes lost by the refugees, most now levelled or occupied by the Israelis.

Salam Fayyad, the Palestinian Prime Minister, was among dignitaries who attended the inauguration of a “camp of return”, featuring displays of photographs and documents telling the story of the forced exodus.

During the holiday, Israel is prohibiting Palestinians from the West Bank and Gaza from entering Israel, fearing attempts by militants to disrupt the celebrations.

The commemoration comes amid doubts over fresh efforts to secure a peace deal, jeopardised by the continuing expansion of Israeli settlements in the West Bank and ongoing attacks on Israeli border areas by militants based in the blockaded and besieged Gaza Strip.

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