In Arab city, Jewish settlers dig in heels. One afternoon this week, gun-toting settlers strolled through market as Arab shopkeepers went about their business in occupied Hebron

Geula Cohen, a parliament member from the right-wing Tehiya party, stood this week in a crowded alley in Hebron's old market. She explained why she and six other Knesset members were holding a sit-in in an empty apartment just above the crowded fruit and vegetable stalls around her. ``Hebron is a Jewish city,'' she said as Arab shopkeepers looked on. ``Little by little Jews will live here. If we go on fighting, the government will change its policy. . . .''

Cohen and her colleagues were evicted peacefully by Israeli soldiers Tuesday, but the drive to renew Jewish settlement in the heart of this Arab city of 60,000 continues to rock Israel's fragile ``national unity'' Cabinet.

Throughout the week, the coalition government was caught in an ideological debate between its two major partners, the right-wing Likud and centrist Labor parties. After hinting they would resign over the issue at a stormy meeting Sunday, Likud ministers continued to insist they would not compromise on Jewish settlement anywhere on the West Bank, claiming it was a fundamental part of their party platform. Israel annexed the West Bank from Jordan in the 1967 Arab-Israeli war.

In a speech Tuesday, Likud Minister Ariel Sharon attacked Prime Minister Shimon Peres and Defense Minister Yitzhak Rabin of Labor, who ordered the eviction. ``They are simply carrying out the White Paper policy,'' Sharon said, refering to a 1939 British mandate document limiting Jewish immigration to Palestine.

``We don't think Jews should enter into Arab settlements, because we believe in coexistence,'' Labor Minister Mordechai Gur retorted. ``Settlement should take place next to and not inside these population centers.''

Labor does not oppose Jewish settlement in the West Bank and Gaza Strip, but objects to settling in densely populated Arab areas, on grounds this would make future territorial compromise with Jordan impossible. The Likud opposes any such compromise, and wants to keep the West Bank and Gaza strip under Israeli control.

The rising political strains reflected this week's tensions in Hebron, where the battle between Israeli settlers and Palestinian Arabs is fought in very close quarters.

Yards away from the old market, Israeli flags and drab military watchtowers poke out above the few settler enclaves squeezed in among the close-packed stone houses of the city. Some 30 Israeli families live in houses in the old Jewish quarter, digging in tenaciously despite violent Arab opposition.

In May 1980 seven settlers were killed, and in July 1983, a Jewish seminary student was fatally stabbed. The latest casualty occurred two weeks ago, when a resident of the neighboring settlement of Kiryat Arba was wounded in a knife attack.

Unfazed by the violence, the settlers have stubbornly stuck to their aim of reestablishing a Jewish presence in the heart of the city where 60 Jews were killed in anti-Zionist Arab riots in 1929.

One afternoon this week gun-toting settlers could be seen strolling through the market. In the Jewish-run restaurant nearby, visitors ate behind metal grills on the windows and near the door.

In the market, Arab shopkeepers went about their business, seemingly oblivious of the parliament members' sit-in just a few feet from their stalls.

``We don't need problems,'' said one shopkeeper. ``We don't want the Jews to live here. . . . If someone goes behind the house and attacks the Jews, there will be trouble.''

At midday the market was quiet, except for a minor commotion when Defense Minsiter Rabin, accompanied by an entourage of officers, threaded his way through the cramped alleys and climbed up to the apartment in the crumbling three-story building. Minutes later he ducked out out of the low archway leading to the stone house after failing to persuade its occupants to leave.

Rabin was not the only visitor. The day before, Minister Sharon visited the apartment to express his support for the sit-in and was confronted by a group of anti-settlement demonstrators.

Later, Rabbi Eliezer Waldman of the Tehiya party emerged from the apartment to expound his views.

``Why can anyone buy a house in Hebron, and Jews don't have that right?'' he asked. He said Jewish settlers had bought the apartment and 11 other buildings in the area. The Defense Ministry has refused to recognize the purchases.

Rabbi Waldman stood in the early morning darkness and spoke of his attachment to the house he had just left. ``Its amazing,'' he said as the Muslim call for prayer wailed in the distance. ``It was a dingy house, but a house in the Land of Israel just the same. It hurt very much to leave it.''

Settler plans call for rebuilding the old Jewish quarter, and moving the old market and Hebron's central bus station to make room for an additional 100 Jewish families in the heart of the city.