Israel has forensically identified the remains of two dead Israeli soldiers returned by Hezbollah this morning as being Ehud Goldwasser and Eldad Regev, the two reservists whose abduction by the Islamists triggered a war two years ago which killed more than 1,200 people.

As part of a landmark prisoner exchange, two black coffins carrying the bodies were carried by the Red Cross over the border dividing southern Lebanon and northern Israel at Rosh Hanikra. The two had not been heard from since their capture two years ago.

As Israel mourned its dead soldiers, with funerals planned for Thursday, Lebanon readied itself for a massive celebration for the five Hezbollah militants set to be returned by Israel in exchange.

Chief among them is Samir Kantar, held for nearly 30 years in an Israeli prison for the killing of an Israeli father and his four-year-old daughter.

Following identification of Mr Goldwasser and Mr Regev by Israel this lunchtime, the five militants, and 199 Lebanese and Palestinian guerrillas killed in clashes between the two countries, will be handed over by Israel, in a move expected later today.

Such is the controversy surrounding Kantar’s release that Israel planned his transfer from prison to the exchange site along a route that would stay clear of Nahariya, the scene of his attack.

Kantar is reviled among Israelis for the brutality of his attack, which was etched onto the Israeli public consciousness as one of the most vicious in the state’s history. In his trial, witnesses recounted how in the dead of night on April 22, 1979, Kantar shot Danny Haran in front of his child, then killed her by smashing her skull against a rock with his rifle butt.

Mr Haran's wife, Smadar, accidentally smothered her two-year-old daughter with her hand while trying to stifle her cries. Kantar has never expressed remorse over the incident.

Israel has long-refused to free Kantar, holding him as a bargaining chip to win new information about Ron Arad, an Israeli airman whose plane crashed in Lebanon in 1986. But, despairing of wresting new information about his fate from Hezbollah, and under pressure from the captured soldiers' families to bring them home, Israel's Cabinet voted yesterday to release him in exchange for the bodies of the two captured soldiers.

Israeli President Shimon Peres took the first formal step to activate the swap by formally pardoning Kantar late last night.

“This is a sad day for me and for the country,” he told reporters before signing the pardon. “On one hand, we have the most terrible murderer. On the other hand, we have our commitment to our boys who were sent to fight for their country. It is our moral duty and our heartfelt wish to see them come back.”

The prisoner-swap has sparked a debate within Israel over the price the Jewish State is willing to pay for returning kidnapped soldiers. Critics claim that, by trading bodies for prisoners, Israel is giving militants little incentive to keep captured soldiers alive. This is particularly relevant as it applies to an ongoing hostage-taking in the Gaza Strip, where Palestinian militants are holding a third Israeli soldier, Gilad Shalit, also seized two years ago but believed to be still alive.

Family members of the two were spending the day at a short distance from the exchange-site, with some secluded in a closed military compound in the western Galilee, and others remaining in their private homes. Military funerals are planned for Thursday.

Israeli government and military officials worked late into the night preparing the logistics for today’s exchange. 24 hours ahead of the swap, the Israeli military declared a several-mile-wide radius around the border a closed military zone, banning all non-approved personnel from going near to the site were the swap would occur.

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