The problem of rediscovering Jewish identity is a problem not only in the Diaspora, but also, with some differences, in the State of Israel.
The State of Israel is of course a state of Jews.
But what is the meaning of their Jewishness?
If Jewishness is just a matter of being born to Jewish parents or a pejorative term used only by anti-Semites, then of course all of us are and will be Jews.
But if Judaism, or being Jewish, has any specific inner meaning, if it is really a definite identity, then we are losing it, albeit quite slowly, in the State of Israel and all over the world.
I am not saying that even the State of Israel is not Jewish enough.
When you don't know what this "being Jewish" is, when you don't feel it, don't have it in you, then you cut your communication with your past, with your present, and with other Jews, and finally you have nothing that is inherently Jewish except that undefinable something that one calls "being a Jew."
Judaism has to be a living thing and a thing that is lived.
Otherwise it won't work.
–Rabbi Adin Steinsaltz
From "The Question of Jewish Identity" by Rabbi Adin Steinsaltz