As Israel withdrew its remaining troops Sunday and brought the curtain down on its 34-day war against Hezbollah, the country was counting the military, political and strategic cost of a conflict seen by many as a desperate failure.

"It was defeat for Israel. That is the way it is perceived in the Arab world and perception is reality," said Moshe Arens, twice defence minister.

"It has changed the feeling for years that no coalition of Arab forces would be able to defeat Israel," he added.

The conflict, launched after Hezbollah guerrillas captured two soldiers and killed eight in cross-border raids on July 12, failed to bring the missing servicemen home, or to stop more than 4,000 rockets from bombarding towns and villages across Israel's north.

Weeks of mudslinging and demands for heads to roll have weakened Israel's five-month-old coalition government and forced Prime Minister Ehud Olmert to shelve his election promise to withdraw from most of the West Bank.

"Four months ago we had elections. Now we don't know if the government is going to survive. We've had 31 governments in 58 years. There is no stability in the Israeli political system," said history professor David Menashri.

After the initial pullout from south Lebanon in 2000 and from the Gaza Strip in 2005 failed to prevent attacks, the public now doubts that plans to uproot tens of thousands of Jews from Palestinian land will improve Israeli security.

"The withdrawal from Lebanon seems to have been a platform for further attacks against Israel, (and) similarly in the Gaza area. The pendulum seems to be swinging in the direction of the more hawkish sentiment," said Arens.

Israel's military, the most powerful in the Middle East, was not only caught off guard by the initial Hezbollah attack but its commanders were also lambasted over issuing confused orders, inadequate equipment and a delayed ground offensive.

"The war showed that Israelis have been failed by their leaders, both military and civilian," said political science professor Stuart Cohen.

In addition to the war, a series of scandals has added to the Israeli leadership's problems. President Moshe Katsav is being investigated after allegations of sexual assault and Olmert is being probed over alleged property scams.

"There is not a single politician who can be said to demonstrate quality of leadership. The number of politicians, including the president, who are under investigation for wrongdoing... is a disgrace," said Cohen.

"The worst thing is for the citizens' confidence in their government to collapse, and I think we're very, very close to it."

Abroad, Israel's chief ally Washington may be as supportive as ever, but the Jewish state's image has plummeted elsewhere from the highs after the Gaza pullout over criticisms about the devastating use of firepower in Lebanon.

David Kimche, a former director general of the foreign ministry, admitted mistakes, but also described the war as a wake-up call in dealing with the Hezbollah threat.