On the day last week that Israel gained admission to the prestigious Organization for Economic Cooperation and Development, Israeli Defense Minister Ehud Barak told the Knesset's Foreign Affairs and Defense Committee that Israel's continued control over the Palestinians was eroding its global standing.

Whereas Prime Minister Benjamin Netanyahu hailed Israel’s joining of the OECD as an economic and diplomatic coup, Barak warned of a growing tide of international isolation unless Israel comes out with a major peace initiative of its own, irrespective of the OECD membership.

The differences between Netanyahu and Barak lie at the heart of the debate over how central the Israeli-Palestinian process is to Israel’s diplomatic efforts worldwide.

Some believe Israel can safely ride out the storm of international pressure for progress on the Israeli-Palestinian front. But many others argue that a credible peacemaking orientation is an essential component of Israel's standing in the world, and that Netanyahu is alienating Israel’s few friends.

Barak, the Labor Party leader, makes no secret of his concern at the way differences over peacemaking have embroiled the Netanyahu government not only with the Obama administration, but also with some of its closest allies in Europe.

Israel long has had a rough ride in European public opinion, but since Netanyahu came to power in March 2009, there have been growing signs of tensions with friendly European leaders and governments, particularly Britain, Germany and France.

Part of Netanyahu's image problem has been his foreign minister, Avigdor Lieberman, who is widely perceived in Europe as a crude anti-Arab bulldozer against peace. But mainly it is skepticism over Netanyahu's own seriousness about peacemaking that is hurting Israel. European leaders are not convinced of the genuineness of his commitment to the two-state solution, and they also see his declarations about continued construction of Jewish housing in eastern Jerusalem as unnecessarily provocative.

Moreover, Netanyahu's oscillation between peace commitments to satisfy President Obama and construction promises to appease his right wing have led to a loss of credibility on the international stage.

Britain, for example, has been one of Israel's staunchest allies in Europe. On a visit to Israel in July 2008, former British Prime Minister Gordon Brown underlined the intimacy of the relationship by addressing the Knesset and launching a new Britain-Israel partnership for research and academic exchange. Brown also was one of six European heads of government who made a solidarity visit to Israel at the height of the war with Hamas in Gaza in January 2009.

But after Netanyahu came to power two months later, the Brown government's policies quickly took an anti-Israel turn. In July, Britain decided not to renew five military export licenses, all for spare parts for naval guns, to protest Israel's alleged use of disproportionate force in Gaza.

"We do not grant licenses where there is a clear risk that arms will be used for external aggression or internal repression," a British Embassy spokesman in Tel Aviv declared.

In December, the British Department for Environment, Food and Rural Affairs ruled that produce from West Bank settlements could no longer be labeled "produced in Israel," but must be tagged "product of the West Bank." An optional additional label could clarify whether the origin was an Israeli settlement or Palestinian -- a move Israel saw as encouraging a boycott of settler produce.

Also in December, much to Israel's consternation, Britain backed an abortive Swedish move to have the European Union recognize East Jerusalem as the capital of a future Palestine.

Relations were strained further by the British government's failure to take promised action against legislation enabling anti-Israeli groups to bring war crimes charges against Israeli leaders and generals.

Alarmed by a move to press war crimes charges against Kadima Party leader Tzipi Livni, British leaders in December again vowed to repeal the offending legislation – but so far to no avail.

Tension between the two countries came to a head in February when it became apparent that suspected Israeli Mossad agents allegedly used forged British passports, among others, for the assassination in Dubai of a leading Hamas operative. The British responded by expelling an unnamed Israeli diplomat from London.

Things may be worse with Germany, where Netanyahu got into a spat with Chancellor Angela Merkel, who probably has been Israel's best and most influential friend on the continent. It happened in a telephone conversation in mid-March.

According to the German version, Merkel called Netanyahu at Obama's request to urge no further building in eastern Jerusalem. She asked that the call be kept secret and promised to refrain from public criticism of Israel's construction policies.

Netanyahu, however, immediately arranged for a briefing of Israeli journalists and told them he had called Merkel to inform her of Israel’s building plans in eastern Jerusalem.

Merkel felt Netanyahu had betrayed her trust, according to senior German sources. The Germans then released their version of the conversation and, during a news conference the next day, Merkel publicly criticized Israeli building in eastern Jerusalem.

Netanyahu apparently also is on the outs with French President Nicolas Sarkozy, once a close personal friend. In mid-April, Sarkozy told Israeli President Shimon Peres that he was disappointed in Netanyahu and found it hard to understand the prime minister's political thinking.

"I don't understand where Netanyahu is going or what he wants," the French president was quoted as saying.

Sarkozy also has been outspoken about Lieberman's presence in the government. In a meeting with Netanyahu in Paris last June, he urged Netanyahu to replace Lieberman as foreign minister with Livni and "make history."

"You must get rid of that man," Sarkozy was quoted as saying.

The fact that Israel has strained relations with its three most important backers in Europe has yet to translate into dramatic change in EU policy. Israel's requested upgrading of ties with the European Union remains on hold, but that was the case before Netanyahu came to power. And Israel’s acceptance to the OECD was unanimous by the group’s members.

However, if there is a showdown between Israel and the Palestinians over the peace process, Europe could well be more supportive of the Palestinians. As with the Obama administration, the major European powers make the distinction between fundamental support for Israel's security and right to exist, and criticism of the policies of the current government.

That same distinction is also being made by Jews on the left in Europe, following the lead of J Street in America. In early May European Jews, backed by notable intellectuals such as Bernard Henri Levi and Alain Finkielkraut, formed JCall, a new Jewish organization "committed to the state of Israel and critical of the current choices of its government."

The friction with Obama and Europe, and the loss of automatic Jewish support in both Europe and America is causing concern among many in Jerusalem.

"For first time we have a government that is succeeding … in causing the rest of the world to hate us," Shlomo Avineri, one of Israel's most respected political scientists, wrote recently in the Israeli daily Haaretz.

The conclusion of politicians on the center left, from Livni to Barak, is the same: Israel under Netanyahu needs credible peace policies to turn around in its diplomatic fortunes.

Some of Netanyahu's defenders say the perception that he isn't serious about peacemaking is not fair. The question is, does Netanyahu believe his policies are alienating Israel's friends, and what will he do about it?